Podcast Summary
Unexpected fallout of the recent budget: Despite incorrect predictions, hosts dedicate two episodes to discussing the unexpected fallout of the recent budget and express appreciation for industry events and podcasts.
The property podcast, hosted by Rob Benz and Rob Dicks, covers the latest property news, knowledge, and provides entertainment for thousands of property investors every week. In this particular episode (123), they discuss the unexpected fallout of the recent budget, which was not predicted correctly by the hosts. They plan to dedicate two episodes to this topic to make up for their mistake. Additionally, they mention their appreciation for various events and podcasts in the property industry, such as the St. Albans Property Hub and House Planning Help. They also look forward to their upcoming London meetup.
Budget Changes Impact on Furnished Property Investors: From April 2016, wear and tear allowance for furnished properties is replaced by deducting actual costs of replacing furniture. This may negatively impact tax planning and increase tax liability for some investors, especially those with high-wear HMOs.
The UK government's recent budget announcement brought significant changes for property investors, particularly those with furnished properties. Starting from April 2016, the wear and tear allowance for such properties will no longer be available. Instead, investors will only be able to deduct the actual costs of replacing furniture. This change may negatively impact tax planning and leave some investors worse off, especially those with high-wear HMOs. The rationale behind this change is to bring the tax treatment for property income more in line with typical business expenses, where costs must be shown and accounted for. This is a significant shift for property investors, and it's essential to understand the implications and consider potential strategies to adapt to this new rule. Stay tuned for next week's episode, where we'll dive deeper into the budget changes and discuss potential reactions for property investors.
UK tax policies impact on homeowners and landlords: An increase in tax-free allowance for homeowners renting out rooms & freezing of LHA rates for 4 years may decrease availability of rental properties & potentially higher prices
The UK government has announced several changes to tax policies and housing benefits that will impact both homeowners and landlords differently. One of the less controversial changes is an increase in the tax-free allowance for renting out rooms in one's own home, which will benefit those looking to start property investment. However, a more significant and controversial change is the freezing of Local Housing Allowance (LHA) rates for the next four years, which could negatively impact both landlords and tenants. This change may lead to a decrease in the availability of rental properties for tenants and potentially higher prices in areas where the market is heavily investor-led. Overall, these changes highlight the importance of staying informed about tax policies and their potential impact on real estate investments.
UK Government Limits Tax Deduction for Landlords: From 2020, UK landlords can only claim a 20% tax relief on mortgage interest expenses, leading to increased tax payments and potential housing market impact.
The UK government is phasing out the ability for landlords to fully deduct mortgage interest expenses from their rental income when calculating their taxable profits. By 2020, landlords will only be able to claim a 20% tax relief on their mortgage interest. This means that landlords will have to pay more tax on their rental income, potentially making property investment less financially attractive. For example, if a landlord has £10,000 in rental income and £5,000 in mortgage interest expenses, under the current system they would pay £1,000 or £2,000 in tax depending on their tax rate. But in 2020, they would pay £2,000 or £4,000 in tax respectively. This change may lead to increased costs for landlords and potentially impact the housing market.
Changes to interest deductions impact higher rate taxpayers: Higher rate taxpayers face increased tax liabilities due to interest cost changes, but corporate tax rate reduction may offset it for some investors
The 2015 UK Budget introduced changes to the way interest costs are deducted for tax purposes, which disproportionately affects higher rate taxpayers. Basic rate taxpayers remain unaffected as they continue to pay the same amount in tax. However, higher rate taxpayers now face a significant increase in their tax liabilities. For instance, in the example given, a higher rate taxpayer's tax went up from £2,000 to £3,000. This change may impact many property investors, especially those with large portfolios or side businesses that put them in the 40% tax bracket. On a positive note, the corporate tax rate was lowered from 20% to 18% by 2020, making it more attractive for some investors to hold their portfolios within a company vehicle. This is a complex issue, and there are many nuances to consider, so make sure to check out the Property Hub's discussion on this topic for a more detailed analysis. Overall, the budget brought both challenges and opportunities for property investors, and it's essential to understand how these changes might impact your specific situation.
Impact of Budget on Property Investors: From April 2016, individuals investing through a limited company will face higher taxes on dividends, making it less attractive for property investors, particularly those in the middle class.
Key takeaway from the budget discussion is that individuals investing through a limited company will be negatively affected by the changes to taxation of dividends starting from April 2016. The removal of the 10% tax credit will result in basic rate taxpayers paying 7.5% tax and higher rate taxpayers paying 32.5% tax on dividends, making it more costly to extract profits from a company. Furthermore, there are suggestions that dividends may be taxed at the same rate as income in the future, which could make setting up a company as a tax dodge less attractive. These changes are not great news for property investors, particularly those in the middle class, as they may struggle to subsidize their lifestyles with their investment income. The budget was criticized for targeting the middle classes and financially uneducated individuals, while wealthier investors and landlords will not be significantly impacted due to their understanding of tax planning. Overall, the budget was not favorable for property investors.
Budget changes impacting those with multiple properties: Despite budget changes, proper financial education and tools like RescueTime can help individuals reach their financial goals
The recent budget changes, while not affecting everyone equally, pose a significant challenge for individuals with decent incomes and a few properties. The speaker expresses frustration with what he perceives as an attack on those striving for financial improvement. However, he reassures listeners that with proper financial education, they can navigate these changes and still achieve their financial goals. A useful resource recommended for understanding these changes is RescueTime, a software that tracks computer usage to help individuals understand where their time is being spent. While the budget may have changed the journey, the financial destination remains the same, and the right knowledge and tools can help listeners get there.
Understanding your digital habits with RescueTime: Gain self-awareness of digital habits, receive weekly reports, and take action to improve productivity
Tracking your digital activity with tools like RescueTime can provide valuable insights into how you're actually spending your time, helping you identify areas for improvement and increase productivity. The user-friendly tool sends weekly reports, making it an easy addition to your routine. However, the results may not always be what we want to hear, but acknowledging and addressing unproductive habits is the first step towards change. Additionally, the power of learning from others' experiences was highlighted in a heartfelt listener review. After making mistakes in property investing, Sean from Ireland felt discouraged but found renewed faith and guidance through the Rob and Rob podcast. Their transparent and trustworthy approach provided clarity on past mistakes and the courage to move forward. Overall, whether it's through tracking digital habits or learning from others, gaining self-awareness and taking action are essential steps towards personal growth and achieving goals.
Discussing the latest budget news and its implications for property investors: While the latest budget news may have negative implications for property investors, the team promises to provide solutions and insights during their next session. Attend the Property Hub Meetup for support and join their mailing list for valuable content.
This week on The Prophecy Podcast, Rob and the team discussed the latest budget news, which had some negative implications for property investors. However, they reassured listeners that they would delve deeper into the implications and discuss potential solutions during their next session, which will take place on Thursday. In the meantime, they encouraged listeners to attend the Property Hub Meetup and offered their support. The team promised to provide more uplifting content next week to counterbalance the downbeat budget news. They reminded listeners to join their mailing list and leave positive reviews to help spread the word about the podcast. Overall, the team emphasized their commitment to providing valuable insights and support to property investors, even during challenging economic times.
