I
IainDoc
New Member
I’m looking to buy a property and rent it out for most of the year to offset costs, make some money and have a place in the sun to use. A well worn path, I know.
Whilst looking and considering different types of places etc, I’ve been getting more alarmed about the tax consequences. So far I’m trying to get a definitive answer to my first question:
Is mortgage interest only allowed as a deduction, or is the capital repayment element also allowed. I suspect it’s only the interest element, but would greatly appreciate any precise advice in this matter. (This is probably an easy question for current owners.)
My bigger concern, and the title of this thread, is what happens post Brexit.
U.K. Residents won’t be part of the EU and therefore no longer entitled to take the deductions and will, in theory, have to stump up the flat tax of 24.75% of the gross income. Back to the ‘good old days’ for the Spanish taxman.
If this happens and you have a property with a sizeable mortgage, surely this will all but destroy your profits. Even a mortgage free property will still incur sizeable expenditures if rented throughout the year and the marginal rate will be nearer 33% of your net rents. (10k income, 25% expenses, a net rent of 7.5k, tax of 2.5k = 33%)
The figures, if you have a 4K annual mortgage payment, giving a net rent of 3.5k and a tax bill of 2.5k which is…… 71%.
Maybe the Spanish will do a ‘sweetheart’ tax deal to continue to allow these deductions, perhaps to avoid a stampede to the exits with Brits with grossly over leveraged properties trying to get out of them fast (everyone knows how that story ends). But any such deal could be challenged by other interested groups such as Hotel groups (already mightily upset by AirBnB operators) Spanish resident landlords ( good old fashioned nationalism / anti competition) or the French! (world champions at taxation – plenty of UK owned holiday homes to feast upon).
I’m sure this scenario, possibly in less than 3 years, will make current owner/renters very uneasy. I’m sure no one will want to believe it. As I haven’t bought anywhere yet, I have to assume this will happen.
Does anyone out there have good grounds to say this won’t happen? What would be the alternative?
From where I am sitting (in the UK),Spanish property ownership, from an investment point of view, is not really viable and very possibly a disaster waiting to happen.
I really want to buy somewhere but everywhere I look I see big problems.
Can anyone cheer me up?
Whilst looking and considering different types of places etc, I’ve been getting more alarmed about the tax consequences. So far I’m trying to get a definitive answer to my first question:
Is mortgage interest only allowed as a deduction, or is the capital repayment element also allowed. I suspect it’s only the interest element, but would greatly appreciate any precise advice in this matter. (This is probably an easy question for current owners.)
My bigger concern, and the title of this thread, is what happens post Brexit.
U.K. Residents won’t be part of the EU and therefore no longer entitled to take the deductions and will, in theory, have to stump up the flat tax of 24.75% of the gross income. Back to the ‘good old days’ for the Spanish taxman.
If this happens and you have a property with a sizeable mortgage, surely this will all but destroy your profits. Even a mortgage free property will still incur sizeable expenditures if rented throughout the year and the marginal rate will be nearer 33% of your net rents. (10k income, 25% expenses, a net rent of 7.5k, tax of 2.5k = 33%)
The figures, if you have a 4K annual mortgage payment, giving a net rent of 3.5k and a tax bill of 2.5k which is…… 71%.
Maybe the Spanish will do a ‘sweetheart’ tax deal to continue to allow these deductions, perhaps to avoid a stampede to the exits with Brits with grossly over leveraged properties trying to get out of them fast (everyone knows how that story ends). But any such deal could be challenged by other interested groups such as Hotel groups (already mightily upset by AirBnB operators) Spanish resident landlords ( good old fashioned nationalism / anti competition) or the French! (world champions at taxation – plenty of UK owned holiday homes to feast upon).
I’m sure this scenario, possibly in less than 3 years, will make current owner/renters very uneasy. I’m sure no one will want to believe it. As I haven’t bought anywhere yet, I have to assume this will happen.
Does anyone out there have good grounds to say this won’t happen? What would be the alternative?
From where I am sitting (in the UK),Spanish property ownership, from an investment point of view, is not really viable and very possibly a disaster waiting to happen.
I really want to buy somewhere but everywhere I look I see big problems.
Can anyone cheer me up?
