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Anyone other accidental landlords concerned about this?
The other change is arguably a bigger deal and involves something called lettings relief, which currently provides up to £40,000 of relief (£80,000 for a couple) to people who let out a property that is, or has been in the past, their main home. From April 2020, lettings relief will only apply where the owner is sharing occupancy of the home with a tenant – effectively spelling the end of this perk.
https://www.theguardian.com/money/2018/nov/03/budget-tax-on-landlords-could-cost-them-13000
We still have my wife's old house let out as keeping it seemed like a good idea at the time (another source of potential pension income / capital), but maybe selling it sooner and just investing the capital makes more sense...
Well it may persuade some people to let things go at a better price too if the tax is coming in to them which would help the market a lot.
I thought the market was already falling or at least sliding?
No complaints here. All moves in the right direction 😉
There will be some people hurt by this. I've a couple of friends who have homes but moved part of the country to keep themselves in employment - renting out the house they own (have a mortgage on) and renting a house closer to their new employment. Even for a like for like house they loose out as they have to pay tax on the rent they receive as income. To then have to pay even more capital gains tax on the house they own when they come to sell it does not seem fair in my book.
Even for a like for like house they loose out as they have to pay tax on the rent they receive as income. To then have to pay even more capital gains tax on the house they own when they come to sell it does not seem fair in my book.
Two different things so it is right that they are taxed differently. Look at this way, the house might not gain anything in which case there will be no tax to pay.
To be fair, you have until 2020 to sell up and use up the existing CG allowance. The only issue is it doesn't seem very widely publicised, I only read about it this morning.
Yep, you are only paying tax on gains and profits. As an accidental landlord just breaking even should be good enough. Nothing morally wrong with making a profit if it does work out that way, then you pay some tax. I'd be holding onto property at the moment. Can't say I believe the doom and gloom. It will carry on going up long term and will carry on being a source of income well into retirement.
It's only (eventually) removing a perk that there was no good reason for. CGT only taxes an unearned gain, with an exempt amount of about 12k and a tax rate that rises to no more than 28% on large sums above that. It's hardly punitive on people who are making huge gains from the property market. The example in the Guardian has a tax bill of abut 13k on a 120k gain - ie just over 10% of the unearned windfall, and that's assuming he is a higher rate taxpayer who has also used his 12k exempt amount on some other gain (another house sale in the same year, perhaps?). Would you rather have taxes raised on earned income instead? The govt needs some money from somewhere.
The govt needs some money from somewhere.
Which is fine by me.
But as accidental landlords, trying to provide a retirement income, I'd like to figure out what the best thing to do it (which is probably impossible as no one knows what house prices vs share prices will do relative to one another over the next 20 years)...
But as accidental landlords, trying to provide a retirement income,…
is that a contradiction? You’re either an accidental landlord because you can’t sell your property or you are using an investment in property in place of a pension investment.
Not really, we each had a house before we met, and never quite got round to doing something with the spare one. Hence accidental (common phrase used to describe this situation). Intentional would have been buying a house specifically as a BTL etc.
I am in this position and it seems perfectly fair to me. You will still I think be able to get round I think it by living in it for a year or two before you sell which is what we intend to do
Unearnied income / capital gain tax relief is money going to the rich. Be nice if they would go after other shources of this as well.
But as accidental landlords, trying to provide a retirement income, I’d like to figure out what the best thing to do it (which is probably impossible as no one knows what house prices vs share prices will do relative to one another over the next 20 years)…
Presumably the idea is to incentivise investment that is better for the country and economy.
Sticking a few hundred thousand pounds in shares or starting up a company helps to grow the economy.
Sticking a few hundred thousand pounds in the housing market just inflates the housing market meaning it sucks more and more money out of circulation, which looks great if you own more than one house, but horrible if you own less than one.
I'd agree with gonefishin. You may have started as an accidental landlord but choosing to keep the property it with a view to making a profit means you would no longer be one. No problem with that plan but it sounds like exactly the loophole this is closing
From a tax perspective why should there be a difference between “accidental” and “intentional”? You either earn the income from rent or you don’t and you either gain some capital or you don’t. Either way you have pay the appropriate tax. It’s certainly what I did when I sold my old flat.
You can always move back in to reduce the taxable gain. The more ppr years clocked up v total years reduces the liability. I plan to do this. The problem with the housing market is the shortage of supply, I would sell mine to ftb ers but I would have to pay loads of cgt, so that's the supply further shortened. At least it is selective, I just let them tick over at c 4% yield which I am quite happy with.
Could be badly affected by this . We currently rent our uk homes and dont want to sell . We lived in it 5 years and has been rented for the past 18 months . The equity is more or less 300000 .
Those numbers are ok you get an extra 18 months plus your 5 years ppr, assuming you owned it for 6.5 years. Assume it's in joint names too so that's 24k cgt allowance. Equity is academic its the capital gain less capital expenses, and purchase sale costs.
Also note the cgt liability dies with you if you are liable for inheritance tax.
. The equity is more or less 300000 .
CGT is calculated on the gain not the equity. I’d be astonished if any house in the UK had gained £300,000 in six and a half years. Even if it had the liability would likely be zero (or very close to it) if it’s only been rented out for 18 months and owner occupied before that
Sticking a few hundred thousand pounds in shares or starting up a company helps to grow the economy.
Buying shares doesn't actually help the economy at all, the company whose shares you buy doesn't see any of it, so it doesn't grow the company in any way. The broker gets a cut I suppose, but that's a tiny percentage.
Being a landlord we provide a home for somebody who couldn't afford to buy the same house and given the lack of council houses, our tenant's only option is private rentals.
Buying shares doesn’t actually help the economy at all, the company whose shares you buy doesn’t see any of it, so it doesn’t grow the company in any way. The broker gets a cut I suppose, but that’s a tiny percentage.
did you build the house in question because if you didn’t then it’s the same situation you described with the shares?