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  • Tax

    Others ways to reduce impact of S24

    Hello,

    I see a few threads debating the possibility of paying off mortgages to reduce the potential impact of S24.

    Has anyone else got any other tricks lined up to stay as a basic rate tax payer? We have purchased properties in my wife's name (or T in C with a large proportion to my wife) as she is/was a basic rate tax payer, now with the S24 changes she's on the cusp of 40% tax with rental income (even on part-time hours). It's good to see that the goverment are encouraging us to work less (I should do the same thing and reduce my hours to get child tax credits back too), anyway I digress.....

    I was thinking about childcare vouchers. Anyone know if these reduce my wife's taxable income? Same for pension contributions? Any other ideas?

    Thanks

    Luke

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    Yep as I've stated  offset mortgages could recover your lost tax credits.

    Do your DD on the product.

    If you are able to remortgage your resi then do so.

    Pay those proceeds into an offset mortgage savings account and recover your lost tax credits!!

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    I've just looked into offset mortgages and get the idea but I'm not sure I understand what youre saying?

    Would you please explain it for me, sorry for being slow.

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    Because my dear chap if you are able to chuck in loads of money into offset mortgage savings accounts so  you can reduce your interest income!

    Yes I know this might be hypothetical as very few LL have a money tree to shake to use to deposit proceeds into an offset mortgage savings account!

    But if you can raise those monies you could come in under the HRT territory and recover your tax credits which are worth thousands to you.

    Offset allow you to deleverage whilst still retaining the same mortgage debt

    It is the only mortgage product which enables a LL to increase or decrease debt at the click of a mouse and I'm surprised Govt hasn't banned them!

    That is the purest form of control a LL has these days!

    I don't know by how much you are pushed into HRT territory, but it must surely he worthwhile borrowing on your resi or shaking a money tree you might have to reduce your mortgage interest 'income'!?

    You aren't slow

    Many struggle to get their heads round offset mortgages, much as I still do with S24!!!

    I don't believe I will ever understand S24!!

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    I was ' slow ' when first trying to get my head around off-set mortages.

    I've got one now with First Direct ( Top bank - won Which awards ) and I don't think there are many off-set mortgages about now.

    Chris

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    Hi Paul

    I've just sold a piece of land and plan to wholly offset my small resi mortgage with some of it, saving the rest until the next budget unfolds (or unravels before their eyes hopefully).

    So I understand that part.

    As background, I'm below the HRT threshold because my houses are in the north and unencumbered, I'm happier that way despite the power of leverage as I have all that I need and dislike borrowing.

    I got one BTL mortgage as an exception because I wanted a flat in eyewateringly expensive Brighton that I can retire into one day.

    Its currently a three student HMO with marvellous tenants and falls outside the scope of licencing for now.

    As for borrowing more against my resi, that would require me to re enter slavery so won't be happening.

    So are you saying I can offset savings against BTL mortgage interest too? (its with BM).

    Thank you in advance my lady



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    Yes

    If you have a BTL offset mortgage you may pay as much into the offset savings account as you want

    I believe the lenders prefer there always to be at least £1 of mortgage debt.

    This would mean with a £150000 mortgage and £149999 in the offset savings account you would pay interest on £1

    The more you reduce the offset savings the more S24 tax you will pay.

    Though on £1 of mortgage debt it wouldn't be much!

    So as you can see the more offset savings you have the less interest charges are and consequent S24 taxes.

    This can keep you in BRT territory.

    Which could be very useful to prevent being pushed into HRT territory with the loss of tax credits etc.

     Remember that with a click of a mouse you could withdraw ALL the offset savings.

    Then your S24 costs increase rapidly as your interest income increases

    Of course you could the day after return those recently removed savings to the account and pay hardly any S24 tax as the interest would be next to nothing

    You will not find a more effective instrument than a BTL offset mortgage.

    Especially now offset mortgage rates are extremely competitive

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    Except you will be paying maximum tax on the rental income without any tax credit.

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    Agreed, which is why a fine calculation needs to be made

    It is always an individual calculation

    LL need to reduce income somehow

    An offset mortgage is one way.

    It isn't easy to reduce employment income and very soon Govt will stop most of the salary sacrifice schemes.

    I guess the self employed can manage income reduction easier.

    I suppose the queries with an accountant would be to ascertain how much income reduction is needed to stay as a BRT and not lose tax credits etc.

    We need a calculator to work backwards to just below BRT banding

    Then we can know by how much we need to reduce income by

    With the GE now on us I believe there will be many more tax raising regulations being imposed on LL of all types.

    This is a time for knock out blows to be showered on the PRS.

    Nobody will object to LL being clobbered.

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    So is a BTL offset mortgage a specific product or is it something one can apply to any existing BTL mortgage?

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    Ahh!!

    I see where you maybe confused

    A BTL offset mortgage is a dedicated product.

    You have to remortgage to an offset mortgage account product.

    This will consist of a mortgage and linked offset savings account.

    Offset mortgage requirements can be more onerous.

    Generally lower LTV is required.

    But if you manage to obtain one if these offset mortgages you will never have to remortgage again

    But hey nothing ventured nothing gained!!




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