UK buy to let mortgages

[Beaglehound]

You can deduct the depreciation of the property according to Japanese rules, which often means you can reduce your income tax. This is one reason real estate is so popular with high earners here.

If we assume UK property (unlike in Japan) is likely to appreciate rather than deprecate will this increase our income tax here? Or only when the property is sold (capital gains)?

Capital gains when it’s sold I think, minus conveyancing and maintenance costs. Notional appreciation would not count as actual income.

I’m a bit unclear about whether the Japanese tax office would want their pound of flesh from letting gains though. I see buy to letters upthread talking of having to file UK self assessment, so does that mean the Japanese government defers to the UK on that?

[RetireJapan]

You can deduct the depreciation of the property according to Japanese rules, which often means you can reduce your income tax. This is one reason real estate is so popular with high earners here.

If we assume UK property (unlike in Japan) is likely to appreciate rather than deprecate will this increase our income tax here? Or only when the property is sold (capital gains)?

Depreciation is done on a schedule, not based on actual valuations. So you get to depreciate anyway.

When you sell you'll be making a bigger capital gain though (although the capital gain tax may well be lower than your marginal income tax).

[eyeswideshut]

You can deduct the depreciation of the property according to Japanese rules, which often means you can reduce your income tax. This is one reason real estate is so popular with high earners here.

If we assume UK property (unlike in Japan) is likely to appreciate rather than deprecate will this increase our income tax here? Or only when the property is sold (capital gains)?

Depreciation is done on a schedule, not based on actual valuations. So you get to depreciate anyway.

When you sell you'll be making a bigger capital gain though (although the capital gain tax may well be lower than your marginal income tax).

Ben is correct. What happens is you are going to work out the total structure value (not land) of the property and then apply that figure to the pre-determined depreciation schedule use by the JTA. This schedule has no relationship to actual values - it is kind of like an accounting fiction.

You can then use that depreciation amount against all income earned (not just rental income) over the set depreciation period. When you subsequently sell the property, assuming you have fully depreciated the structure, you will need to pay capital gains on the difference between the tax value (which may be close to 0) and the value at sale. So there is no free lunch. The reason high income people do it is because the Japanese long term capital gains tax rate is much lower than the income tax rate.

Additionally, for permanent tax residents you must declare overseas assets worth more than 50 million Yen in aggregate (and you cannot deduct loans from that amount). So purchasing an overseas property may require you to self-declare all overseas assets every year.

[Cheeseman]

Looking at the return on investment and likely gains in house property prices in the near. Future, I’m having second thoughts on buying a UK property. Especially with the added headaches of tenants, stamp duty, taxation, management etc
A typical two bed semi in the area I’m looking at is around 165,000 pounds with a rental income of 600-750 per month.
Beginning to think stress free index funds would be a better bet?

[Beaglehound]

Everyone’s different but my thinking is similar to yours Cheeseman. If there is a strong chance you will want to live in the UK in future I think it makes sense to have a foothold in the property market and the returns from letting in the meantime will likely be acceptable if not stellar. But as a pure investment it seems a lot of hassle.

[RetireJapan]

In a fairly huge development, it seems the tax office is planning to eliminate depreciation expenses for overseas real estate. Link in tomorrow's Monday Read.

[DragonAsh]

The population density in the UK is the highest in Europe. There isn't enough suitable building land hence the high prices of housing compared to wages.

Have you ever even been to the UK? Go drive around nearly any part of London, let alone the UK - you will think many things, 'gee, no room for houses' is not one of them.

I was 30 minutes outside the City on the Tube. Acres and acres of open land. Like, you could get properly lost. There were horses behind my house. And that's half an hour's train ride from the middle of London. There may be any number of reasons why property prices are so high in the UK, lack of suitable building land is not one of them.

And in any rate, your quote isn't true, the Netherlands are significantly more densely populated than England.

By the way, the immigrants will eventually need pensions and health care as they get old. I guess you would propose importing another 20 million immigrants to cover their costs.

Immigrants in the UK are more likely to be working age adults (ages 26-64), not kids and not retirement age; the majority of immigrants spend their retirement age in their home country. This is why immigrants are a major net benefit: They generally pay in to the social safety net systems, but often are not in the country when they would be of the age to receive such benefits.

In Japan, the GDP might decline in the future. But the quality of life will improve as cities become less crowded and housing will be more affordable.

You say 'less crowded', I say 'smaller workforce supporting an increasingly larger elderly population'. Quality of life -may- improve, but I'm skeptical that the benefits of less crowding won't be more than offset by skyrocketing costs associated with an increasingly aging society.

In any rate - housing in Japan is already very affordable: residential rent in Tokyo is half the level in nearly any major city in the US or London, and rents have stayed stable for literally decades. And you can't say it's because of a shrinking population, Tokyo's population has been growing. Nor is it because of smaller homes - average floor space per dweller is up around 30% vs 15 years ago. No, it's because Tokyo has been building more houses on a net basis (around 100,000 new homes a year). London could relatively easily tackle the housing problem if they wanted. It's more a political problem then a real estate or land problem.

[Sybil]

Have you ever even been to the UK? Go drive around nearly any part of London, let alone the UK - you will think many things, 'gee, no room for houses' is not one of them.......

ETC...

Your post is just rude and confrontational. I will let the moderator deal with it.

[Cheeseman]

http://digimap.blogs.edina.ac.uk/files/ ... ltarea.jpg

[Beaglehound]

I now have a vision of all Scotland’s residential buildings being crammed into South Uist. Quite windy over there.

On a serious note, it may be that parts of the UK are densely populated but as a Scot it’s pretty clear that our part of the UK is not bursting at the seams. When I see the type of terrain commonly built on here in Japan and compare it to the lack of development in the Highlands, the contrast is stark.