buy-to-let - removal of higher rate

[chorne1966]

Hi, I am a landlord with this scenario and following the removal of the interest relief for higher rate tax payers in the budget for my buy-to-let properties would anybody have any potential tax planning advice?

Scenario
 
Problem I'm facing is my rent is approx 200k a year with 150k say interest payment -- so a simplified version with no tax break etc

 
Currently 50k Profit @ 20% tax = £10k tax

 
New system would be

 
200k In rent 10k on first 50k (50k @ 20%)  and 40% on the other 150k - 60k totalling 70K tax

 
minus 150k - 20% tax relief 30k

 
= 40k Tax

 

So my tax is going up 4 times and doesn't make it worth it, its unfair as it is run as a business any ideas?? However 50k profit - 40k tax is still 10k Profit

 
Worse situation is when interest rates go up and say i am paying 170k in interest payments i'm facing 70k tax minus 34k relief ( 170 @ 20% ) so tax is 36k however i'm only making 30k thus a 6k loss in total

 

[section 44]

its unfair as it is run as a business

... is any property letting business run otherwise than a business ...?

[Duhamel]

Incorporation would be my first suggestion but its probably worth checking this with your mortgage company before seeking professional advice. If the mortgage company won't transfer the loans to a company, then it's a non starter.

[bd6759]

Perhaps the brutal answer is to sell some of your properties and use the equity to reduce the borrowing on the others. Is there any reason why the rest if the population should fund your accumulation of capital assets? The population at large do not get tax relief in their mortgages. Is it fair that you do?