Government BTL tax changes – workarounds
I have always purchased my investment properties through a limited company so am quite lucky I suppose in that I don’t see any impact on my business with the potential government changes (my turn will come I’m sure).
However, I was thinking last week on what would I do if I was in the shoes of you guys out there who have bought property in your own names. I would create a new ltd co that would lease the BTL property from myself at a rate that would be at close to cost (mortgage cost).
The ltd company would be the separate legal entity that would appear on the ASTs and all rents, expenses etc would go through the bank account of the new ltd co.
All costs would be deducted in the normal way against rental income and corporation tax would be paid at the standard rate.
The personal taxation would not change as there is no profit on the lease.
There would be a personal tax liability on the dividend income but the chancellor would take less of a slice this way.
Has anyone done this or maybe it’s been raised on the forum and I’ve missed it?
Thanks
Laurie
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Member Since September 2015 - Comments: 4
10:18 AM, 15th September 2015, About 11 years ago
Thanks Mark that’s interesting and highly annoying 😉 I was so sure I could just plough my btl income into a SIPP and claim back the tax from the pension contribution in that way, but thanks for clarifying
Member Since January 2011 - Comments: 12212 - Articles: 1417
12:25 PM, 15th September 2015, About 11 years ago
Reply to the comment left by “tom brady” at “15/09/2015 – 10:18“:
You may still be able to do this if you have other forms of taxable income from employment or self employment.
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Member Since September 2015 - Comments: 4
3:58 PM, 15th September 2015, About 11 years ago
Thanks Mark, no other income except buy let, maybe selling up is the only option
Member Since January 2011 - Comments: 12212 - Articles: 1417
5:06 PM, 15th September 2015, About 11 years ago
Reply to the comment left by “tom brady” at “15/09/2015 – 15:58“:
Before you make that decision Tom, have a look at this article >>> https://www.property118.com/landlord-strategies/79789/
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Member Since July 2015 - Comments: 154
6:14 PM, 15th September 2015, About 11 years ago
I think you can put up to £3,600 pa – gross – into a pension without net relevant earnings – suggest you speak to a specialist pension broker.
Member Since August 2015 - Comments: 287
9:53 PM, 17th September 2015, About 11 years ago
I have a question on pensions. There are some significant changes to pensions also announced in the Budget.
AIUI
In April 2016, the current £40k cap on contributions stays, but tapers down to £10k at the rate of £1 for every £2 earned above £150k of ‘adjusted income’ Q: Is ‘adjusted income’ different from ‘relevant income’ and, if so, does ‘adjusted income’ include rental income (and other investment income)?
Q: If so, then from April 2017, given that finance costs on BTL are – essentially – taxable income, what impact does that have on pension contribution limits?
Q: If you have a job with a pension scheme, especially a defined benefits pension scheme, how will this affect you?
I am just trying to work this out for myself just now – anyone that has thought about it already that is able to share, please do.
On the plus side, anyone with only BTL income that wants to contribute to a pension scheme, will (if my understanding is correct) be able to from April 2016
Comments: 51
12:06 PM, 19th September 2015, About 11 years ago
Reply to the comment left by “Jon Pipllman” at “13/09/2015 – 09:04“:
Can we adopt the recognised protocol of when First mentioning an Abbreviation, putting its full description afterwards ( on the initial use
GAAR
( grrrrrr )
Member Since January 2011 - Comments: 12212 - Articles: 1417
12:56 PM, 19th September 2015, About 11 years ago
Reply to the comment left by “Chris Daniel” at “19/09/2015 – 12:06“:
GAAR – General Anti Abuse Rules – see >>> https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/399270/2__HMRC_GAAR_Guidance_Parts_A-C_with_effect_from_30_January_2015_AD_V6.pdf
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