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The taxman cometh.
Just like off-duty policemen always look like on-duty policemen, the taxman is the embodiment of the job it is his lot to perform.
And here he is looking at your buy-to-rent property.
The market has done well for you. And he wants his slice of the pie. He wants a big slice, too – a big greedy slice when you consider what he wants to take off you and yours in that inheritance tax when you die.
But what are the rules on buy-to-let tax? You need to be aware so you can play the game and not fall foul of the taxman and the law. (Tip: The trick with the taxman is to operate unnoticed – once noticed, you are a suspect.)
So here are the tax rules:
I said yesterday that I rather admired the bravado on display at Northern Rock as they continued to offer mortgages with high multiples of income and over the value of the security. But his story today shows that they've moved beyond bravado into the realms of pure stupidity:
There are lots of logical reasons why Northern Rock should push on – regardless of the growing criticism – and pay shareholders their interim dividend.For a start the cost of the 14.2p interim dividend is just £59m – "a mere drop in the ocean", as one Northern Rock adviser put it, given the £3bn that the troubled bank has had to borrow from the Bank of England to prop up its broken business model.
It is also reasonable to point out that the dividend was promised weeks before the bank was plunged into chaos and that it won't just be the board and senior management who miss out – small shareholders, frontline staff and pension funds will also be hit.
But the fact is that the Northern Rock situation is no longer about logic.
Quite what is going to happen to Northern Rock is as yet unknown. It seems pretty clear that it's not going to survive long as an independent business, that's for sure.
There's no way that the commercial paper markets are going to open up again for it, if, as and when, the Bank of England guarantee is withdrawn.
So that leaves only one of three options, someone else buys it, it goes bust or it is closed down in an orderly manner.
The thing is, there doesn't seem to be anyone who wants to buy it: thus there's going bust quickly or slowly:
As the Wall St Journal blog points out, Alan Greenspan has identified the true culprits in the current credit crunch.
...former Federal Reserve Chairman Alan Greenspan sharply criticized ratings agencies for their role in the current credit crisis. “People believed they knew what they were doing,” Mr. Greenspan says in today’s German newspaper. “And they don’t.”Still, he doesn’t think it’s necessary to strengthen rating-agency regulation. Essentially, they’re “already regulated,” he says, because investors’ loss of trust means the agencies are likely to lose business. “There’s no point regulating this. The horse is out of the barn, as we like to say.” Greenspan also said he believes that the volume of structured-finance products will decrease. “What kept them in place is a belief on the part of those who invested in that, that they were properly priced. Now everyone knows that they weren’t. And they know that they can’t really be properly priced,” said Greenspan.
Many of us when we hit eighteen look forward to drinking inordinate amounts of alcohol - legally – going to an 18-rated movie and legally do all those things that have been denied us for so long.
A few - let’s call them Paris and Tara – will have the added bonus of a call from their bank manager. “Hello,” he’ll say. “Since you are now of age, I am required by law to hand you the contents of an account set up in trust for you. You, my dear, are sticking rich. You lucky s**.”
Being the recipient of a trust-fund windfall, is something we cannot all be - but we can tell you what they are and why they are.
You’re right-on. You’ve got a “Drop The Debt” T-shirt, two years on a kibbutz under your hemp belt and more cheap-yet-meaningful bracelets than Argos.
And now you’ve got a bank account.
Oh, the shame. But you need one of these instruments of capitalism because you are about to experience debt at close quarters. The maximum maintenance loan is £4,405. A year! Can you live off that?
To facilitate the debt you need a bank account. And that gives you access to an overdraft.
This is the amount of money you owe the bank. And because the banks know you are a student, and therefore cash poor, they can offer you a very decent rate.
The incredible thing is that because the banks see you as a future good earner they are fighting for your custom.
Because no-one is sure which way the stock market will jump, and savings are offering low returns, investors are looking ways to beat the market. It is impossible to give any definites, but you should at least be familiar with the options.
We’ve touched on the risky side of investing with spread betting, and now look at some safer options. One of these is a guaranteed income bond (Gib). These are run by life-insurers and not, as with your savings account, by banks or building societies. Interest on Gibs is paid net of basic-rate tax. Non-taxpayers cannot reclaim it.
Tim looks at 'Emissions Tax Idiocy'.
Grr. I do wish people would think a little more about these things.
Motorists are facing a fresh squeeze from Alistair Darling, the chancellor, with a one-off £2,000 tax on 4x4s and the most polluting cars, a leaked Treasury paper has revealed.The new “purchase tax” would have to be paid when a luxury car, such as a Range Rover or top-of-the-range BMW, is bought at the showroom. In subsequent years owners would pay the top rate for their road tax disc, which is also set for big rises under the confidential plans.
The aim is to reduce emissions. Thus the tax should be as closely associated with emissions as possible. That means on petrol, not on the sunk cost of the car itself.
However, the report goes on to admit that “under any option emission reductions are small”.
See! Even the Treasury doesn't think it's very sensible.
Via [Tim Worstall; Anorak]
In light of Harriet Harman's comments, Beau Bo D'Or has produced apicures on life in dopwning street, as it was once known...
Via [Beau Bo D'Or; Anorak]
The Croydonian notes: Mrs Harriet Harman speaking:
Or Jack Dromey, as I believe he prefers to be known. He is deputy general secretary of the T&G Unite.
"It is plain wrong for private equity to claim they should get preferential tax treatment".
Preferential compared to what Jack? If I win big on the premium bonds I have hidden away somewhere, that would be tax free...
How can it be right that private equiteers boast of paying less tax than their cleaners and then expect us, the ordinary tax-paying public, to back their privileged position.
Erm, no. I think you will find that they do not collectively boast at all, and while some may have arranged their tax affairs in such a way that they pay a less confiscatory rate, I very much doubt that they pay less in total.
Tim has some 'Fun With Statistics; at the TUC.
Via Richard Murphy we get this, a fun filled list of ten things you didn't know about inequality. Number nine is especially interesting.
The richest fifth pay £18 tax on every £100 of disposable income, while the poorest fifth pay £30. (HMRC direct and indirect tax).
How can that be? We know that income taxes are higher for the richest than the poorest, so how can this be?
Aaah. The secret is in the word "disposable". Disposable income means what you can spend after income taxes, NI (and yes it does include any benefits you might get, either directly or via the tax system) and housing costs have been deducted.
