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  • Tax

    My thoughts as 3rd stage of S24 approaches



    Like most Landlords, I am now looking at my year end accounts and getting ready to submit my accounts to my Accountant

    Part Three of Section 24 starts after the 5 April 2019 which is a challenge but it's a challenge I will meet!

    I came to a conclusion after chats with JC (Jonathan Clarke)  on the topic of  Buy to let still viable starting out in 2019?

    It is still viable but with restrictions

    I think my thoughts are this:

    If you can stay below the higher rate threshold of £50,000 a year it works well

    But if you breach the 40% tax threshold you will pay a lot of Tax so its not a bad earner - £50k a year is a good income especially if you live in the NE where the cost of living is low

    My view on using a company is divided to be very honest ...

    I call it the "Company Straight Jacket".

    Yes you can use all the same principles - Leverage  at 75% creates a good yielding business and it looks great on paper.

    The company will work for higher rate Tax Payers or Landlords old and new who work or have other income streams that pushes them into Higher Rate Tax

    But this is where the Straight Jack will tighten as you wish to remove your profits to live on!

    The working Landlord will, I imagine, buy investment property so that when they reach a certain age they will stop their job and then switch on the Income from their BTL property - and I can see a lot of sense in that strategy

    But they will pay more tax and NI in the long run

    Again we come back to a similar result if the Director stays below £50K a year with salary or Dividends, a Company can work well

    My opinion, for what its worth is simple - Keep it personal as long as you can

    The company route in my opinion in general is second best

    But if you are a new landlord and you work, I think its maybe the only way to go.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    It's 41% rather than 40%  and still £43,430 threshold in Scotland. We have started to sell properties to try to keep the tax low. It's not just the tax, it's the increased CGT to 28% if you go over the £43430.

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    Yes one of my friends lives over the border and he is in the same boat as you

    so yes keep it below 43k and it works

    BTL has had its wings clipped ?

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Thanks for your thoughts, as ever DL, and I concur.

    I was at a BTL Seminar last Thursday, and the tax specialist gave a lot of warnings about limited company structures.  She said a lot of people would end up regretting going down that road as there were many restrictions and complications. 

    ​She also made a point of highlighting that certain entities have been really pushing this to landlords, because they benefit from the referrals.  Her advice was to seek completely independent and impartial advice directly via a reputable firm and not an introducer, otherwise you might be subjected to someone else's agenda, and that might not best serve your best interests.

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    I agree

    You can see by some of the blogs/forums, the company strategy is being sold as a remedy for all landlord problems, when it’s not.

    Keep it personal.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Hi,

    I wonder if you would advise the same in my scenario. Essentially looking at setting up company and offsetting costs by the reduction in stamp duty payment. I spoke to RITA but they just told me advantages and disadvantages and wouldn't advise one way or the other.

    Me and my girlfriend are going to purchase a property together £390k Value, we both currently own BTL properties of value of around 110k with mortgages.


    I am aware that as we already own properties we will be subject to the higher rate of stamp duty, which will be a stamp duty payment of around 21k total. We want to keep the BTL properties and moving into them temporarily is not an option.


    The option I'm looking at;

    1. Sell both BTL to the SPV. This will save a small amount after the reduced stamp duty payment but will leave us with two properties in the SPV, which could be better long term. I am a higher tax rate payer she is not.
    Any viable options I have missed? Is it a financial adviser I need to speak to, or is the another specialist that would be more appropriate?


    Thanks for your time and any guidance you can offer.


    Adam

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    I can’t give you the advice you seek

    when S24 was announced I sought the opinion of three tax consultants.

    All gave a different view and I chose the one which I thought was correct

    Hope that helps?  DL

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    My plan is to give up my day job and pursue a combination of less well paid work as a freelancer plus voluntary work supplemented by pension and property income.

    My pensions are split between final salary and a SIPP but my intention is not to touch the SIPP unless I  have to and maybe even continue to pay into it. My biggest fear is that I might accidentally take too much out of the SIPP and trigger drawdown.  

    I may buy more properties in the future but these would have to be in a company to allow me to pay the income into my pension.

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    As a 60 year old landlord I see great value in pensions

    you can strip out the profits tax free from the company what is there not to like

    you do have to be careful not to draw the taxable  income from pension

    otherwise it reduces the money you can put in

    my company pays me a pension and the company pays my wife a salary she is a lower rate tax payer

    the good thing about pension is even when you do withdraw the taxable pension it’s NI free, so it’s another saving

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    As someone who has decided to incorporate I find these debates very restrictive. There are many options available, not just 2. It's like the debates on whether to invest in the North or the South East which appear to completely dismiss other locations.

    I chose to incorporate after looking at the options available to own my property in a trust. Along the way I discovered that I could own commercial property in a pension, any property in a REIT or a partnership or get complex and look at a hybrid scheme.

    I'm not subject to S24 and I don't focus too much on tax for this year or next year, an awareness is enough. I do want to know what will happen when I die, what will happen if I require care, what happens when I retire and what happens in marriage/divorce. I could possibly save a bit this year and next year as a sole trader, but in the overall scheme, in my circumstances, it wouldn't be a wise option.

    I have often stated that its not what you buy or where you buy that is most important, its how you buy. I've been able to do the what and the where myself but I'm paying for qualified advice and assistance on the how. I believe this will provide the best long term solution.

    The only advice I would offer to others is to take the best professional advice you can, as each of us is unique and will require a bespoke solution.

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