Buying a house

Started by Boolerhead Mel, January 06, 2009, 03:54:19 PM

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Rois

Quote from: 93-DY-SAM on June 17, 2020, 09:44:30 AM

In the North you'd be subject to CGT when you go to sell a property that isn't your primary residence. But you can mitigate this to a certain extent. A good accountant will advise you.

Yeah I think that it is the additional CGT payable on the way out by higher rate tax payers (28% compared with 18% for basic tax rate payers for property gains) - I wasn't aware of it as hadn't been an issue for me.

Additional stamp duty on the way in for anyone who owns a property already can cost a bit, obviously depending on the value of the house. 

Maroon Manc

Explained below


https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782#:~:text=Landlord%20mortgage%20interest%20tax%20relief%20in%202020%2D21,of%20your%20mortgage%20interest%20payments.

As of April 2020, you are no longer able to deduct any of your mortgage expenses from rental income to reduce your tax bill. Instead, you'll receive a tax-credit, based on 20% of your mortgage interest payments. This is less generous for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments under the old rules. The new system is being phased in over several years. For the 2019-20 tax year, you could deduct one quarter of your rental income, while three quarters of your mortgage interest payments received the tax credit. For previous years:  In the 2017-18 tax year, you could claim 75% of your mortgage tax relief In the 2018-19 tax year, you could claim 50% of your mortgage tax relief The table below shows how this will impact on a higher-rate taxpaying landlord receiving £950 rent a month and paying £600 towards their mortgage. 

trailer

Quote from: 93-DY-SAM on June 17, 2020, 09:44:30 AM
Quote from: TabClear on June 17, 2020, 08:04:10 AM
Quote from: Taylor on June 17, 2020, 07:58:31 AM
Quote from: imtommygunn on June 16, 2020, 08:42:11 PM
The only thing I can see on higher rate tax payers is the tax on profits of selling your house? (I couldn't work out if it was second home only but presumably most who makes profits on a first home it will just be put back into the other house anyway so won't be profit?)  Also it would presumably only kick in if you had no mortgage?

*disclaimer I don't know very much on tax of these things but was just interested on the higher rate tax thing

I had thought you would have to pay a higher tax rate when you sell it on as it isnt your primary residence?

I know the law is a lot less favourable now in terms of interest deductibility. You used to be able to deduct all mortgage interest against taxable profits, thats no longer the case.

In the North you'd be subject to CGT when you go to sell a property that isn't your primary residence. But you can mitigate this to a certain extent. A good accountant will advise you.

I don't know what the higher tax is about. Because this isn't your primary residence and you are earning income on it you have to pay tax on that income. That all gets included in your overall income declared in your tax return. You might find the rental income pushes you into the higher earners tax band. That is what you need to watch for. It is not that you have to pay any specific higher tax because of the house isn't your primary residence.

Once you also add in the fact that mortgage interest relief was ditched in April this year it means you now can't write that off as tax deductible. This alone is pushing many landlords into the higher tax bracket. All explained here better than I can:

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782


Many landlords with one property are getting out of it as an investment because in a lot of cases the return is just not worth it any more. You'd need to be in it for the long haul and that introduces other costs. The longer you have a property the more likelihood you'll have some major maintenance to do at some point. If your rent is just about covering the mortgage and a few ongoing regular costs then you will be digging into your own pocket to pay for that.

But you still have the asset that certainly over a long period it "should" appreciate. Buying a rental property to earn money off in the short term isn't a good idea. But certainly in the medium to long term (and yes you'll have to maintain it), it should be a pretty solid bet.

Taylor

Quote from: trailer on June 17, 2020, 10:17:29 AM
Quote from: 93-DY-SAM on June 17, 2020, 09:44:30 AM
Quote from: TabClear on June 17, 2020, 08:04:10 AM
Quote from: Taylor on June 17, 2020, 07:58:31 AM
Quote from: imtommygunn on June 16, 2020, 08:42:11 PM
The only thing I can see on higher rate tax payers is the tax on profits of selling your house? (I couldn't work out if it was second home only but presumably most who makes profits on a first home it will just be put back into the other house anyway so won't be profit?)  Also it would presumably only kick in if you had no mortgage?

*disclaimer I don't know very much on tax of these things but was just interested on the higher rate tax thing

I had thought you would have to pay a higher tax rate when you sell it on as it isnt your primary residence?

I know the law is a lot less favourable now in terms of interest deductibility. You used to be able to deduct all mortgage interest against taxable profits, thats no longer the case.

In the North you'd be subject to CGT when you go to sell a property that isn't your primary residence. But you can mitigate this to a certain extent. A good accountant will advise you.

I don't know what the higher tax is about. Because this isn't your primary residence and you are earning income on it you have to pay tax on that income. That all gets included in your overall income declared in your tax return. You might find the rental income pushes you into the higher earners tax band. That is what you need to watch for. It is not that you have to pay any specific higher tax because of the house isn't your primary residence.

Once you also add in the fact that mortgage interest relief was ditched in April this year it means you now can't write that off as tax deductible. This alone is pushing many landlords into the higher tax bracket. All explained here better than I can:

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782


Many landlords with one property are getting out of it as an investment because in a lot of cases the return is just not worth it any more. You'd need to be in it for the long haul and that introduces other costs. The longer you have a property the more likelihood you'll have some major maintenance to do at some point. If your rent is just about covering the mortgage and a few ongoing regular costs then you will be digging into your own pocket to pay for that.

But you still have the asset that certainly over a long period it "should" appreciate. Buying a rental property to earn money off in the short term isn't a good idea. But certainly in the medium to long term (and yes you'll have to maintain it), it should be a pretty solid bet.

But then you are hit with the tax when you go to sell it trailer.

Depending on the appreciation value would it really be worth it?

93-DY-SAM

Quote from: trailer on June 17, 2020, 10:17:29 AM
Quote from: 93-DY-SAM on June 17, 2020, 09:44:30 AM
Quote from: TabClear on June 17, 2020, 08:04:10 AM
Quote from: Taylor on June 17, 2020, 07:58:31 AM
Quote from: imtommygunn on June 16, 2020, 08:42:11 PM
The only thing I can see on higher rate tax payers is the tax on profits of selling your house? (I couldn't work out if it was second home only but presumably most who makes profits on a first home it will just be put back into the other house anyway so won't be profit?)  Also it would presumably only kick in if you had no mortgage?

*disclaimer I don't know very much on tax of these things but was just interested on the higher rate tax thing

I had thought you would have to pay a higher tax rate when you sell it on as it isnt your primary residence?

I know the law is a lot less favourable now in terms of interest deductibility. You used to be able to deduct all mortgage interest against taxable profits, thats no longer the case.

In the North you'd be subject to CGT when you go to sell a property that isn't your primary residence. But you can mitigate this to a certain extent. A good accountant will advise you.

I don't know what the higher tax is about. Because this isn't your primary residence and you are earning income on it you have to pay tax on that income. That all gets included in your overall income declared in your tax return. You might find the rental income pushes you into the higher earners tax band. That is what you need to watch for. It is not that you have to pay any specific higher tax because of the house isn't your primary residence.

Once you also add in the fact that mortgage interest relief was ditched in April this year it means you now can't write that off as tax deductible. This alone is pushing many landlords into the higher tax bracket. All explained here better than I can:

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782


Many landlords with one property are getting out of it as an investment because in a lot of cases the return is just not worth it any more. You'd need to be in it for the long haul and that introduces other costs. The longer you have a property the more likelihood you'll have some major maintenance to do at some point. If your rent is just about covering the mortgage and a few ongoing regular costs then you will be digging into your own pocket to pay for that.

But you still have the asset that certainly over a long period it "should" appreciate. Buying a rental property to earn money off in the short term isn't a good idea. But certainly in the medium to long term (and yes you'll have to maintain it), it should be a pretty solid bet.

I'm not saying that it is right or wrong. It obviously depends on each individuals circumstances. I'm just pointing out things to consider before anyone jumps into a BTL. Everyone should do their homework which I hope they would do anyway.

trueblue1234

Quote from: Taylor on June 17, 2020, 10:31:35 AM
Quote from: trailer on June 17, 2020, 10:17:29 AM
Quote from: 93-DY-SAM on June 17, 2020, 09:44:30 AM
Quote from: TabClear on June 17, 2020, 08:04:10 AM
Quote from: Taylor on June 17, 2020, 07:58:31 AM
Quote from: imtommygunn on June 16, 2020, 08:42:11 PM
The only thing I can see on higher rate tax payers is the tax on profits of selling your house? (I couldn't work out if it was second home only but presumably most who makes profits on a first home it will just be put back into the other house anyway so won't be profit?)  Also it would presumably only kick in if you had no mortgage?

*disclaimer I don't know very much on tax of these things but was just interested on the higher rate tax thing

I had thought you would have to pay a higher tax rate when you sell it on as it isnt your primary residence?

I know the law is a lot less favourable now in terms of interest deductibility. You used to be able to deduct all mortgage interest against taxable profits, thats no longer the case.

In the North you'd be subject to CGT when you go to sell a property that isn't your primary residence. But you can mitigate this to a certain extent. A good accountant will advise you.

I don't know what the higher tax is about. Because this isn't your primary residence and you are earning income on it you have to pay tax on that income. That all gets included in your overall income declared in your tax return. You might find the rental income pushes you into the higher earners tax band. That is what you need to watch for. It is not that you have to pay any specific higher tax because of the house isn't your primary residence.

Once you also add in the fact that mortgage interest relief was ditched in April this year it means you now can't write that off as tax deductible. This alone is pushing many landlords into the higher tax bracket. All explained here better than I can:

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782


Many landlords with one property are getting out of it as an investment because in a lot of cases the return is just not worth it any more. You'd need to be in it for the long haul and that introduces other costs. The longer you have a property the more likelihood you'll have some major maintenance to do at some point. If your rent is just about covering the mortgage and a few ongoing regular costs then you will be digging into your own pocket to pay for that.

But you still have the asset that certainly over a long period it "should" appreciate. Buying a rental property to earn money off in the short term isn't a good idea. But certainly in the medium to long term (and yes you'll have to maintain it), it should be a pretty solid bet.

But then you are hit with the tax when you go to sell it trailer.

Depending on the appreciation value would it really be worth it?

It needs to be a long term investment (Unless you hit lucky with serious rise in house prices). But if your covering your mortgage with the rent over a 15-20 year and only out the cost of regular maintenance then you'll should still be quids in at the end with the asset. You won't be cash rich during the time (especially not at the start) but remember as the mortgage comes down, your rent will start to show profits as mortgage repayments decrease and you should be able to cover maintenance costs as well. But think you need to have a reasonable deposit or else your really at risk of increased interest rates.
 
Grammar: the difference between knowing your shit

Maroon Manc

#261
Timing is very important whether its long term or not. I'm been involved in property for a long time and seen what happened during the last recession,

You could end up buying at the top of the market and in 5 years time when you're mortgage deal comes to an end you'd to find more money to put into the property as the value has fallen. I bought at the top of the market last time and was very heavily into negative equity just 3 years later. Took most of the properties 7 or 8 years to get back to what I'd paid for them in terms of value from original purchase price and this was in a big city. If I'd opted for a fixed period mortgage I'd have lost the lot, I gambled on linking most of those mortgages to base rate.

Barriers to entry are making it more difficult with the additional stamp duty being another. Yes if you plan on holding the property for 20 years you should be ok but we'd all rather pay 10-20% less for something.




trailer

Quote from: Taylor on June 17, 2020, 10:31:35 AM
Quote from: trailer on June 17, 2020, 10:17:29 AM
Quote from: 93-DY-SAM on June 17, 2020, 09:44:30 AM
Quote from: TabClear on June 17, 2020, 08:04:10 AM
Quote from: Taylor on June 17, 2020, 07:58:31 AM
Quote from: imtommygunn on June 16, 2020, 08:42:11 PM
The only thing I can see on higher rate tax payers is the tax on profits of selling your house? (I couldn't work out if it was second home only but presumably most who makes profits on a first home it will just be put back into the other house anyway so won't be profit?)  Also it would presumably only kick in if you had no mortgage?

*disclaimer I don't know very much on tax of these things but was just interested on the higher rate tax thing

I had thought you would have to pay a higher tax rate when you sell it on as it isnt your primary residence?

I know the law is a lot less favourable now in terms of interest deductibility. You used to be able to deduct all mortgage interest against taxable profits, thats no longer the case.

In the North you'd be subject to CGT when you go to sell a property that isn't your primary residence. But you can mitigate this to a certain extent. A good accountant will advise you.

I don't know what the higher tax is about. Because this isn't your primary residence and you are earning income on it you have to pay tax on that income. That all gets included in your overall income declared in your tax return. You might find the rental income pushes you into the higher earners tax band. That is what you need to watch for. It is not that you have to pay any specific higher tax because of the house isn't your primary residence.

Once you also add in the fact that mortgage interest relief was ditched in April this year it means you now can't write that off as tax deductible. This alone is pushing many landlords into the higher tax bracket. All explained here better than I can:

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782


Many landlords with one property are getting out of it as an investment because in a lot of cases the return is just not worth it any more. You'd need to be in it for the long haul and that introduces other costs. The longer you have a property the more likelihood you'll have some major maintenance to do at some point. If your rent is just about covering the mortgage and a few ongoing regular costs then you will be digging into your own pocket to pay for that.

But you still have the asset that certainly over a long period it "should" appreciate. Buying a rental property to earn money off in the short term isn't a good idea. But certainly in the medium to long term (and yes you'll have to maintain it), it should be a pretty solid bet.

But then you are hit with the tax when you go to sell it trailer.

Depending on the appreciation value would it really be worth it?

Well if someone else is working to pay your mortgage it should be worth it. No matter what the CGT is. You have an asset worth a couple of hundred thousand that you own outright. There's costs and there's risks but it's a no brainer. I have a few and I'd like to think in 10 -15 years I'll have no mortgage on any of them and be able to sell, pay the tax and still have a tidy lump sum. Well that's the plan anyway. 
The key is good tenants. Even if you're not getting top money a good reliable tenant who pays the rent and gives no hassle is worth taking £50 a month less off than some arsehole who is never on time or always short. I have families in all of mine. Touch wood never give a bit of bother.

TabClear

Quote from: Maroon Manc on June 17, 2020, 12:18:28 PM
Timing is very important whether its long term or not. I'm been involved in property for a long time and seen what happened during the last recession.

You could end up buying at the top of the market and in 5 years time when you're mortgage deal comes to an end you'd to find more money to put into the property as the value has fallen. I bought at the top of the market last time and was very heavily into negative equity just 3 years later. Took most of the properties 7 or 8 years to get back to what I'd paid for them in terms of value from orginal purchase price and this was in a big city. If I'd opted for a fixed period mortgage I'd have lost the lot, I gambled on linking most of those mortgages to base rate.

Barriers to entry are making it more difficult with the additional stamp duty being another. Yes if you plan on holding the property for 20 years you should be ok but we'd all rather pay 10-20% less for something.

You need to decide what kind of a tennat you want as as well as that can ipmact on returns. You can go for the high churn type tenant such as students who will typically get you higher rents but also higher costs whether it be wear and tear or the knowledge you have to get new tenants every year. Alternatively you can go for the more longterm option such as family etc who you will probably get less rent from but who are more likely to take care of the home (scribbling on walls aside!) and stay for a few years. Even with good tenants you are likely to have to do some level of redecorating when they move out. Also there is the hassle of reletting (and cost if you use an agent), potential dead months between tenancies etc.

Personally i prefer to take a lower rent with hopefully less hassle from longterm tenants. Other people who elect to do work themselves will go for the higher income model so it all depends on personal preferences.


RadioGAAGAA

Quote from: trailer on June 17, 2020, 12:37:47 PM
Well if someone else is working to pay your mortgage it should be worth it. No matter what the CGT is. You have an asset worth a couple of hundred thousand that you own outright. There's costs and there's risks but it's a no brainer. I have a few and I'd like to think in 10 -15 years I'll have no mortgage on any of them and be able to sell, pay the tax and still have a tidy lump sum. Well that's the plan anyway. 
The key is good tenants. Even if you're not getting top money a good reliable tenant who pays the rent and gives no hassle is worth taking £50 a month less off than some arsehole who is never on time or always short. I have families in all of mine. Touch wood never give a bit of bother.

Or down the line the monthly income is a great pension source.
i usse an speelchekor

Maroon Manc

The more information I hear on the subject the more I'm convinced house prices will decrease. There's too many people living beyond their means whether their tenants or homeowners and some of them are going to lose their jobs

A lot of people in Manchester especially those under 40 have really stretched themselves to get on the housing ladder, then there's the help to buy schemes where first time buyers are relying on the prices to increase so they can remortgage and pay of the governments 20%. Young couples mortgage up to the hilt with little plan in place for when kids comes along with the added childcare costs.

Some of my mates situations are more than concerning and thats with couples who's jobs are secure, dare no think what will happen should one of them lose their job. One accountant tells me he's got a lot of clients in trouble, huge mortgages/car loans/car leasing, businesses that have run out of cash and with no cash to inject. That has to be a familiar theme across the country.

Then there's the additional deaths that have occurred this year which means more properties coming to the market over the next 6-9 months than would normally.










Milltown Row2

Quote from: Maroon Manc on June 18, 2020, 04:24:16 PM
The more information I hear on the subject the more I'm convinced house prices will decrease. There's too many people living beyond their means whether their tenants or homeowners and some of them are going to lose their jobs

A lot of people in Manchester especially those under 40 have really stretched themselves to get on the housing ladder, then there's the help to buy schemes where first time buyers are relying on the prices to increase so they can remortgage and pay of the governments 20%. Young couples mortgage up to the hilt with little plan in place for when kids comes along with the added childcare costs.

Some of my mates situations are more than concerning and thats with couples who's jobs are secure, dare no think what will happen should one of them lose their job. One accountant tells me he's got a lot of clients in trouble, huge mortgages/car loans/car leasing, businesses that have run out of cash and with no cash to inject. That has to be a familiar theme across the country.

Then there's the additional deaths that have occurred this year which means more properties coming to the market over the next 6-9 months than would normally.
Watched the film the other week, The big short, the problem that got into the situation then, had started again back in 2015, and access to getting homes has become a lot easier, the perfect storm seems to be brewing at the minute.
None of us are getting out of here alive, so please stop treating yourself like an after thought. Ea

screenexile

Quote from: Milltown Row2 on June 18, 2020, 07:50:57 PM
Quote from: Maroon Manc on June 18, 2020, 04:24:16 PM
The more information I hear on the subject the more I'm convinced house prices will decrease. There's too many people living beyond their means whether their tenants or homeowners and some of them are going to lose their jobs

A lot of people in Manchester especially those under 40 have really stretched themselves to get on the housing ladder, then there's the help to buy schemes where first time buyers are relying on the prices to increase so they can remortgage and pay of the governments 20%. Young couples mortgage up to the hilt with little plan in place for when kids comes along with the added childcare costs.

Some of my mates situations are more than concerning and thats with couples who's jobs are secure, dare no think what will happen should one of them lose their job. One accountant tells me he's got a lot of clients in trouble, huge mortgages/car loans/car leasing, businesses that have run out of cash and with no cash to inject. That has to be a familiar theme across the country.

Then there's the additional deaths that have occurred this year which means more properties coming to the market over the next 6-9 months than would normally.
Watched the film the other week, The big short, the problem that got into the situation then, had started again back in 2015, and access to getting homes has become a lot easier, the perfect storm seems to be brewing at the minute.

In terms of the housing market I don't think this recession will be as ridiculous as the last one. Sub Prime and the 100% plus mortgages were a huge contributor whereas banks have really tightened up affordability.

Yes there will probably be people who will lose their homes and less will be buying but I don't think it will be as bad as it was the last time.
House prices also hadn't really gotten back to 2008 levels at least where I'm from anyway maybe in the big cities.

Milltown Row2

There was definitely a tightening by the banks after that in Regards to lending, I remember at the time asking for a car loan, two decent jobs and good income coming in but was a tight interview!

Now I've loads of banks offering credit cards and loans nearly on a monthly basis, only yesterday the Ulster bank phoned to ask me to increase my overdraft during the Covid crisis!

Haven't delved into the housing market yet but I'd be saying it's not like 2010 when it was near impossible
None of us are getting out of here alive, so please stop treating yourself like an after thought. Ea

redzone

If you are using an overdraft every month surely that would be a red flag to a mortgage lender would it not