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  • Buy-to-Let

    My Rate of income Tax 82% with S24 ???

    As an old Landlord I have would have been hit hard with S24 and

    my income tax on my profits would have resulted in a income tax rate in 2020 of around 82%

    I have been working for the past to years and my Plans so far to sell property into my new Ltd Co have gone well

    Looking at my business plan and a bit of guess work my projected rate of income tax will be around 55% if Interest rates stay as they are at present ???

    Its still Higher than I pay at present which is 40%

    If you are investing in your own name have you thought about what rate of tax you will be paying in 2020

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    Learn Change and Adapt ?????

    You know what  I'm trying to work out who is buying in there own name with a buy to let mortgage  and why ?

    Surely sooner or later your going to hit that upper limit

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    I agree a very limited opportunity if your buying in your own name

    Even with a had full of property at low prices you will be paying over 40% with ease

    Every new Landlord needs to think very hard about entering this market in my opinion

    a great number don't understand S24 and other encourage them to jump into an investment which makes NO PROFIT nett

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    Learn Change and Adapt ?????


    Can you elaborate on why, for every £1 you make, 82 pence will go in tax ?


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    Hi I will try to make this as simple as I can but S24 is a  very cunning tax indeed

    Basicly the new Tax will charge a Landlord on turnover not profit

    in the past a Landord could off set all intrest charged aginst Income Tax from this currant year the Goal Post is changing

    let me give you a three line account to show you the effect this is only rough calculations but will give you a flavour of the issue

        Rental Income   £125,0000              With Section 24   Rental Income  £125000

        Other costs        £ 35000                                              Other  costs      £35000

         Interest               £ 50000                                               Interest          £25000 Loss of  50 % tax relief

    Profit for year     £40000 gross                                      Profit for year    £65000gross

    so in rough terms you profit has increased in terms of income tax

    But in reality you are making no more profit than you were before so in real terms you rate of Income tax has grown for the same profit

    Every landlord has a different situation and each landlord needs to crunch the figs and seek advice

    This link may help you

    https://www.rla.org.uk/taxcentre/tax-calculator.shtml

    That's why my income tax rate would have been 82%

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    Learn Change and Adapt ?????


    A few years ago

    couples' income was amalgamated for tax purposes

    we all got MIRAS on mortgages - and some double MIRAS

    we got tax relief on life insurance and endowment policies

    men retired at 65 and woman at 60

    left school at 15

    saturday morning pictures were about nine pence - old money

    Interest rates were 15%

    nobody had heard of BTL

    Income tax rates were as high as 98%

    etc etc

    in a couple of years the lack of tax relief on landlords' mortgage interest will be accepted as the norm

    we all adjust to the changes and carry on

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    When I left school tax was 33%

    VAT was 7% 

    Shirley Williams said in the 1980s if we want base rate of 20% income Tax VAT will have to be 20%

    and she was right

    S24 brakes all the rules of Business on Taxation

    But of course we are not a Business  are we so we are in for the High Jump

    Some of us are  lucky to avoid this evil tax but others will or possibly lose every thing they have worked for and that is totally unfair

    I believe S24 B will come just as MIRAS went so its not over yet for any of us

    I know personally I would not be a Landlord and pay 82% of my income in Tax

    and as has been proved before when the income tax rates rise the govt gets less in the long run

    a good business deal is when something is left as a reward

    No Reward No Business

    I have had my day and I am glad I will have very little property in my name within 10 years

    I am a poor NE Landlord low leverage and If I pay 82% what will the SE Landlords pay with much higher lending than I have

    You know the price of property in your area and because of high prices yields are low

    but if you think Landlords will just accept and go along with this I think your wrong

    Landlords will sell and could possibly bring on a crash and that is all down to taxation



     


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    Learn Change and Adapt ?????


    I didn't say we would accept it, I said we would adjust and carry on.

    Based on current values my gross yields are between 3 & 4% - they were 10 - 12% on purchase.  I would not buy at that level but some people are and accept it as the norm.  

    As I have said previously the gross rates today with Section 24 are less than the net rates of a few years ago without Section 24, that is a landlord of say 10 - 15 years ago was paying more in interest than a landlord would today with the same mortgage with Section 24,  if landlords just look at the cost rather than how it is made up things don't seem as bad.

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    I don't think a Landord  will accept it and the ones who do carry on will be taxed more

    on turnover

    And There is nothing to stop rates going back to what they were 10 years ago

    Each rise of interest rates will make S24 effect worse and that's a fact

    The bit your missing with great respect is the Govt don't want us to invest in Property

    we are blamed for assisting the housing shortage in the UK

    and the Govt may be right on that point But Retrospective Taxation is never fair and only makes matters worse

    If I knew my Income tax rate was 82% on a business I could make a valued judgement if it was worth starting a business

    But to do it via the back door is totally unfair

    Ask any small business owner at present about further costs min wage ,Pensions ,maternity pay  higher VAT Higher NI  ect ect its hard for small business to cope

    The govt are killing the hen that is laying the golden egg

    The only tax they have dropped is corporation tax which in general will only help Large Business

    Investors in all sectors pay more Tax too with the change in dividends

    The prob is we have a bankrupt country which is living beyond its means and the Govt are looking at every way possible to pay for it

    The UK is going to lose out long term and it will kill business if its not careful

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    Learn Change and Adapt ?????


    We are agreed on that the country is living beyond it means.  I am perhaps more accepting of the higher taxation.

    Given that the government needs to raise significant more money by way of taxation I wonder where you would look to collect it - I don't have the answer which is probably a contributory factor in accepting the tax changes.

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    Its a true mess and I don't think you or I could solve this issue

    I would do number of things  

    I would Halt HS2 and stop overseas aid budget

    and I think Income Tax rates need to rise and possibly an increase on NI

    and stop the lowering of Corporation Tax to the level the Govt is talking about

    also the affordability of triple lock on pensions

    I know the above will not be popular but doing nothing is clearly not an option

    As I say we are in a mess

    I think My generation has seen the best and now its down hill



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    Learn Change and Adapt ?????