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I must point out this is not my account
but a flavour of some one I know
I have to say that I would rather spend money on repairs than I would pay 40% tax
but setting this aside you can see how much tax a salary landlord will pay
it’s just an illustration
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
I could go on every thing you charge other than intrest
If the properties are managed at 15% (including VAT) that gives a cost of £21,150 before any addition charges for reletting.
It will cost us an extra £800 a month in tax. The only way I can pay that is rent increase. Fortunately we have kept our rents low for a number of years so I am able to increase. However, my tenants have been with me for a number of years and I really don’t want to increase the rent. I have great tenants across my portfolio, what a shitty thing this S24 is.
I would agree 109% about your views
Even before S24, an individual who was through their job a higher rate taxpayer, was paying higher rate tax on any BTL income. I am what would be classed as a professional property investor these days (10 HMOs, some SAs, major conversions, BMV/DTV purchases, new build, company, SPVs, investment in bigger projects, much business infrastructure etc) but the first baby step prior to resigning the job, was to buy (cash) and let a flat. By the time the rental income had been taxed, we had half, most of the other half went to HMRC. 'Leverage' it, I hear you say, but now S24 is going to block the power of that especially for single lets. At the time I noticed that the rent a room allowance could readily enable a lodger arrangement to outcompete the 'major' investment in a city centre apartment! As it happened, the apartment was sold and the cash used to purchase two 6 room HMOs (leveraged with mortgages) - yes, I had read a couple of books by then and gained the knowledge and experience (NLA accredited, on the forums etc) and contact network. HMOs of course are a much more active business and one has to earn the income, so the 5 fold greater ROI achieved did cost a bit in time. And pro investors will find multiple income streams for their business, major works that add value etc etc, and they will likely incorporate in order to not face higher rate tax but build their business under corporation tax conditions. Overall, it seems that the 'soft zone' of job based higher rate taxpayers with a bit of passive BTL investment on the side is getting heavily squeezed, navigating that soft zone in any transition from job to property business will be more challenging or need different strategy, and any pro property business will need to steer a tighter ship given some greater fiscal and regulatory drag factors now emergent.
I totally agree
the landlord with income from job or pension is going to get hammered
i think the landlord who treats BTL as a job will be in s much better position to Handel the changes
Actually it is far worse for people with a salary.....
I am a full time landlord with rents higher than your example. As I am full time my maintenance bill is far lower than your example because I do 99% of everything myself. However, I have a banker friend who is currently overseas and has to spend a fortune maintaining his couple of properties. His tenants call the agent...they call Jo Bloggs...2 hours later he is £150 down whereas typically I would have spent about a tenner and had a good chat with my tenants at the same time.
I can no longer see why anybody would invest in BTL alongside a job- there just have to be better investments.
i use Repairs as part of my stratergy
i spend a lot of time doing repairs
my tenants love it and it gives me a satisfaction of job well done
and it’s tax deductible what is there not to like
I use a third of income for interest and a third for other costs and a third for profit
it works for me but if your have a job s24 is a nightmare
A simple solution to the problem highlighted is to pay as much of the salary into a pension fund.You can pay upto 40k per year.
Then create a management company for the btl and charge 15 per cent of rents.
That will drastically reduce the tax bill.
He could also take on a member of staff and pay a salary to reduce btl profits further.
He could turn some btl into holiday let's and transfer profits into a pension fund.
I'm assuming the landlord is not married otherwise transfer profits to the spouse in the lowest tax bracket.