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What is landlord tax?

Client seeking BTL mortgage from HSBC

My Client has applied for a BTL mortgage from HSBC. One of the questions on the outgoings list includes how much landlord tax he pays a month.  He asked the advisor what that was and the advisor didn't know. Neither do I. Any ideas? BTW - outgoings include monthly subscription for contact lenses but not the cost of high prescription specialist spectacles he wears for work!

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26th Apr 2018 12:55

I imagine they want to know how much rental income after tax will be available to service the loan - reasonably enough - but are just asking in a very clumsy way.

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26th Apr 2018 15:03

If he is not already a landlord the answer is surely £0.
If he is already a landlord, wouldn't the amount be that calculated for the year under self-assessment divided by 12?

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to andy.partridge
26th Apr 2018 15:45

Or, in my opinion more likely, when he becomes a landlord after completing the purchase of the BTL property he is seeking finance for.

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to johngroganjga
26th Apr 2018 16:03

A little unfair if they are restricting their lending to clairvoyants. A niche market, indeed. If I had that power I would use it for more than a BTL.

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to andy.partridge
26th Apr 2018 20:20

That’s not quite what I meant. If I were lending, I would want to know the marginal cash flows, in and out, expected to accrue to the borrower from the venture I was lending for - in order to assess the cover for the new lending commitment. So I would ask how much rent the property was going to generate and what outgoings, including tax would have to be met before my loan could be serviced.

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26th Apr 2018 15:27

Another stupid question from a lender.

"It depends what you mean HSBC by landlord tax which is a term not familiar to accountants who spend every day dealing with UK tax."

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26th Apr 2018 17:28

Might it be related to the tax deducted at source for non-resident landlords?

Bit niche if it is, but it would have an impact on cash flow.

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26th Apr 2018 21:17

HSBC is trustee of a trust for one of my clients. Every month they take 20% of the gross rent out of the trust account for "Property Income Tax". This money is then held not by the trust but by HSBC in an account that pays no interest. The loss of income may be small now that interest rates are low but they have been trustee of this trust for 50 years.
They are unable or unwilling to explain what this is all about.

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to Joe Soap
30th Apr 2018 10:18

Sounds like HSBC are having trouble with the legislation. Perhaps your client should suggest they retire in favour of a trustee who understands trust taxation

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27th Apr 2018 14:03

ruth.julian wrote:

BTW - outgoings include monthly subscription for contact lenses but not the cost of high prescription specialist spectacles he wears for work!

???
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By MaggieE
30th Apr 2018 11:27

Might they be referring to the new Landlord Licensing Scheme which some local authorities have introduced e.g. Nottingham. As it is £700 -£1,000 per property and not per landlord some people refer to it colloquially as a Landlord Tax.
Not many LAs have introduced it yet, but it applies to all rental properties, nit just HMOs.

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to MaggieE
01st May 2018 11:31

By MaggieE - Thanks, this makes more sense!
By Chatman - taking into account MaggieE's suggestion and yours I will advise him to put zero, until such time as HSBC comes up with clarification.
Thanks to all who have responded, I thought I was seriously lacking some tax knowledge :)

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By chatman
30th Apr 2018 11:43

Can you just say zero, on the basis that he pays nothing that goes by the name "landlord tax".

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