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  • Tax

    S24 for first time buyer (Rental)

    Hi All,

    New to the forum so thought I would ask a question about Tax.  I did look at the Tax tribe but couldn't find an answer.

    I'm looking to buy my first property and then rent it out to tenants.  If I did this, would I be impacted by the new S24 tax implications or does that only affect your 2nd home...?

    Or does the S24 rule apply to ALL Buy to Let's even if it is your first home...

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    It has nothing to do with the home you live in

    S24 effects BTL with a Mortgage on the BTL property they own

    in general it only effects 40% tax payers

    But you need to seek advice as it can be a complicated tax to work out

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    Learn Change and Adapt ?????


    Hi Sanjay K

    The one thing in life you can definitely not control is taxation.  When s24 was introduced the press immediately started saying that all Landlords should buy through Limited Companies, they completely ignored the changes to the taxation of dividends.  The effect of the increased tax on dividends can have the impact of balancing the tax costs between owning personally and through a company.  Plus the tax cost of selling a property through a company and tacking the money out is far higher than selling a property you own personally.

    I always start from what are you looking to achieve i.e. what is your long term strategy.  Is it to buy and hold passing properties to the next generation in which case a company may be an answer or to buy and eventually sell to supplement your income in retirement in which case owning them personally is probably a better answer.  The truth is there is no perfect answer as your objectives over time may change and the tax regime may change with s24 being withdrawn or the taxation through companies increasing.  No one knows what the future holds all you can do is make the best decision you can now and keep your options open.

    I recommend deciding on your strategy for investing then getting advice on how the tax costs will affect you (and there are some alternative options to a company) and then deciding what you want to do.  In addition do not forget you can always hedge your bets by owning some properties personally and some through a company.

    Regards Nigel

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    Great advice  agree S24 is not a large enough reason to move property into a Ltd Co

    I know S24 made me sit down and think a lot more about my old age and where I was going

    I have built a plan to sell 50% of my Business into my Ltd Co

    Company's have a great advantage over personal ownership when it comes to succession

    When a director dies the Company doesn't need to re arrange Mortgages ect as the Company still goes on

    Passing down shares is much easier

    and the Director who starts the company can have a company pension so as you age you have income to support you as you hand over the rains

    S24 is far from fair but it has made me think a great deal more about wealth management

    So good comes from bad

    Its my intention to hold onto in my name property with the lowest mortgages and greatest profit in regard to CGT

    On my death all my company shares and personal property go straight into a family trust.

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    Learn Change and Adapt ?????

    I reckon you have it correct

    Retain low geared properties in sole name  increasing rent to cover the additional  tax

    Highly geared properties will need to be in a corporate entity if possible; so usually done at purchase  outset.

    Will corporate  LL  charge additional rent for the extra tax they have to pay when they draw income from the company?

    So S24 and corporate dividend taxation sort of balances out.

    Either way tenants will be paying for the taxation that is being  imposed on LL.

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    Hi everyone,

    Really informative discussion. I guess the only way the government can really hit landlords now would be by enforcement of tighter rent increases.

    If this was to happened what would your next move be?

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    There are plenty of other ways they could hit landlords, several of which have been tried in the past, such as freezing rents,

    They could just abolish the 20% relief. (Well Labour could, the Conservatives wouldn't dare as it would hit too many pensioners).

    Labour are proposing going back to two rates of corporation tax, so they might then apply S24 to companies by limiting tax relief to the lower rate fo finance costs.

    Limiting rises to CPI+1% as the SNP are doing or even to inflation as Corbyn as suggested wouldn't bother me much, but the necessary accompaning increase in security of tenure would be annoying. I might well sell as properties came empty.

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    If you really want to be paranoid  work out viability based on LHA rates.

    That means reducing gearing substantially or having funds available to reduce gearing immediately  if Corbyn gets in

    That means you will not be able to use those contingency funds for other property investment

    But at least you will have self insured  against that possibility.

    If Labour don't win the next GE you could release those Corbyn contingency funds into other BTL investment!


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