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I had a long chat yesterday with a lady who is also a working Landlord
She is a Higher Rate Tax payer with a Local Govt salary of around £50K per year
She owns 9 BTL properties which have been purchased for a nest egg & a Pension
She is 50 years old and single and has leverage with a LTV of around 70%
The properties pay there way and provide a profit of around 20k per year
Here is the dilemma:
with S24 she will end up with BTL investments making zero profit ????
If she sells and takes the cash she will Pay CGT at higher rate
If she stays in employment she makes no Money from her BTL she may even have to support her BTL if she has voids or Large Repairs
The post she is in has a final salary pension and she has worked in the post for 20 years
If she leaves to become a Full time Landlord she will lose the next 17 years of pension which at present works out at around
£15000 indexed linked and guaranteed for life
This Landlord doesn't want to leave her Job ???
This lady has done the right thing - she has looked at her future and old age and provided for it
But she is now in a dilemma. Even if she sold property and deleveraged she will still be hit with S24
she is in a "No Win" situation.
The effects of Osborne Law are going to be very harsh for her ... and her customers.
Learn Change and Adapt ?????
Assume she has assessed feasibility of the LTD route and attempted incorporation relief?
I did mention she could sell her property off to a new company
and I have passed her over to my Tax Advisor for some guidance
Great. Sorry didn't get that from first read. Interested to hear if folk have had success with claiming incorporation relief... What a ridic situation for one to find themselves in. *slow hand clap for Osbourne. ?
Hi, I noticed that you’d passed you tax advisors details to someone, I could do with a bit of advice, would you mind passing them on to me?
many thanks, Max
Has she considered BICT
Sorry for interrupt. Before I ask a question, I would like to clarify that the 9 BTL properties are under personal mortgages. If it is the case, I would like to ask whether it is necessary to have valuation from personal BTL mortgage to business mortgage. Thanks in advance.
I'd appreciate a chat with your Tax Advisor if possible
What a ridiculous situation to be put in.I think Lord Flight expressed his views about S24 very eloquently, even resorting to some fruity language - "People are being bugger*d up by Government!".
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
The days of being highly leveraged are over, I could see it coming years ago... My strategy has always been put the mortgages on repayment basis and then the property should pay for itself with a 10-15% profit after tax and expenses for things like interest rate rises or government changes. Unfortunately the way the government has done this new tax means they have not left open an exit door for landlords..
Personally I think she has been quite risky with her investments and would guess most of her equity has come from house price increases, yes she looked at her future old age and provided for it but working for a local government and on that sort of wage her pension would be a pretty decent so would have had little to worry about.
I do feel for her as she is in a difficult position but at the same time I could have bought more properties years ago if I had gone higher leveraged and I would have been sitting on millions of increased value however I went the less risky route, the higher the leverage the more risk you are exposed too. There is an out for her but she may not like it, that is sell her primary residence, move into one of the BTL, use the money from the primary residents to pay off some of the debt, wait a while then sell the BTL she moved into and move into another of the BTL's, avoiding CGT... This obviously will only be possible if the BTL's are near her (Again another strategy I have always recommended)
Moving into her BTL sounds like a good idea...could she sell her primary residence into a Ltd company?