Terrible time with council tenant and shock at how law treats landlords15:32 PM, 9th January 2019
About A week ago 40
For far too long now my husband and I have been worrying about section 24 and tax on capital gains. We have already sold three properties and our strategy is to pay down mortgages. The problem was that the CGT our accountant calculated takes such a huge chunk of the net sale proceeds. It felt like the progress is so slow that we were going backwards because our income was also reducing with every property we sell despite paying down our debt. The recent interest rate rises have made that worse and there is no doubt we will have more of those to contend with at some point, we just don’t know when.
For several years now we have been flitting between the UK and our holiday home in Cyprus. We have friends and family in both locations. The tax advantages of tipping the balance of time spent in each Country slightly in favor of Cypus in order to declare tax residency there hadn’t previously occurred to us, let alone the tax benefits.
Having provided a short overview of our circumstances when we booked our Property118 tax consultation this was the first topic raised after we had provided Yvonne with all the additional information she requested. We learned about the uplifting of base costs to the April 2015 value for CGT calculation purposes and how that would affect us if we were to declare residency in Cyprus. The savings were too great to ignore.
The conversation then moved onto an explanation of temporary non-residency and how the number of ties we have to the UK would determine how much time we could spend in the UK without losing the beneficial temporary non-resident tax status.
As we don’t have any young children who will remain in the UK (our three are grown up and living elsewhere anyway) and because neither of us are employed in the UK this meant that for the next three years we could stay in the UK for a maximum of 90 nights a year. After three years this would increase to 90 nights in any six month period. If we were to sell or let our UK home we would only have one tie and could spend up to 120 nights in the UK for the first three years, subject to never spending more than 90 nights in any six months but we didn’t go for that because we want to keep a property for ourselves in the UK. If the 90 day rule becomes an issue for us we could always reconsider that of course.
Our plans to sell properties and to pay down our mortgages remain, but as a result of our tax consultation with Property118 we will now be able to make progress far more efficiently due to the reduction in CGT we would have otherwise paid.
We did ask about incorporation, but it was explained very clearly why that wouldn’t be the right strategy for us. However, we were advised to form a partnership to enable us to be able to split our rental profits equally and we are in the process of doing that now. The reason for doing that is that most of our properties are in Yani’s name (that’s my husband). His share of the rental profits put him into the higher rate tax band by quite some way. We only own three of the properties jointly, which meant that I wasn’t even using all of my nil rate tax band allowance. By forming a partnership and allocating profits 50:50 I will also move into the higher rate tax band for a while (until we sell a few more properties). However, the tax savings from that element of our consultation alone will be upwards of £6,000 a year. This is because I will be paying tax at 20% on the bulk of the extra income I will receive, whereas in the hands of my husband he would have been paying 40% of that element of profits.
Yani and I recommend any landlord who is already paying higher rate tax or selling properties to book a tax consultation with Property118. The service is extremely comprehensive but they are very skilled in terms of simplifying things so that normal people like us can understand.
Finally, our property strategy has clarity again.
Kindest regards to all who have found this informative and useful.
All the best to you all
PS – Property118 also put us in touch with their insurance brokers who saved us a few hundred pounds a year and our property management costs were almost halved by LettingSupermarket.com whose service to date has been far superior service to that we had with our previous letting agent.
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