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Have you identified how far into the 40% Tax Bracket you are? Would moving restructuring bring you back down tax brackets?Such as a few properties into a Limited Company or selling a property or two (and lowering LTV of others).
_________________________________________________________________________My posts are not financial advice, just a rambling guy passing time on a coffee break.The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance._________________________________________________________________________
Thanks for sharing this Kev and i am sorry for your plight. It shows how unfair the retrospective nature of S24 is.If I were in your shoes, I would be inclined to seek a second opinion from a specialist property accountant (forgive me if your accountant specialises in landlord tax ... ).You may need to consider selling a few of the worse performing properties and use the proceeds to pay down the debt on some of the others to lower your LTV.See - Landlord survival plans - curatedGood luck in finding a way through this ...
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Hi Kev,This has stressed the hell out of me for over 2 years.
I have 32 BTL's all in my name all at 85% LTV.
All bought pre crash.
My solution through gleaning from experience research and speaking with tax advisers is.
Form a partnership with the wife in tax year now. A partnership does not incur SDLT when you do the following
Transfer the beneficial interests of the properties into a Ltd co in tax year 2 the added advantage is you wash out any CGT gains you've made previously
but you have to be careful when selling shares.
Your property business is now working under 17% corporation tax levels.
I'm not a qualified tax adviser but the only option left is to claim malfeasance against HMRC on bankruptcy which would probably put me into an early grave.
So I opted for the above solution.
I would get a second opinion, I am in the same position as you but have been unaffected. Are you claiming ALL you expenses? 17 BTLs on 85% ltv brought me in £25k profit. They should work out profit normally and if under the 40% threshold, the additional tax on the interest to be added back should be the same as the 20% credit, (I think that's the best way to explain)
That is not how the Tax calculation now works.
Stage one is to add Rent (after non loan interest expenses) to other gross income - and calculate tax on that aggregate figure.
Of course any part of that aggregate gross income above the current £50k basic rate threshold - will be taxed at 40% or more.
Stage two of the Tax calc then gives you a 20% credit for loan interest when S.24 is fully operational.
The earlier view that S.24 only affects 40% plus taxpayers was therefore simplistic - especially for landlords with full time jobs - or indeed any landlord with other (non rental) income close to 40% tax threshold.
This in large part explains why a number of landlords who formerly were content to charge below market rents - are often now minded to charge full market rents so as to partially offset the extra taxation.
Time will tell whether that ploy means more frequent tenant turnover with higher void costs.
Don't forget that the threshold could go up to £80k, so this would offset a big part of the loss. Probably still in favor of HRMC, but way better than things stand at the moment
I am hoping it rises to 80k that would be helpful
Its the retrospective aspect of S24 which is just awful
Its a cunning tax
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.
If it happens it will soften the blow of S24, but would prefer scrapping new S24 rules altogether
Be great if it did but that plan is no more trustworthy than any other political manifesto.