Purchase money back?

Purchase money back?

11:28 AM, 29th June 2017, About 7 years ago 4

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I would like to know if you by a property out of your own money, can you take the money back each year from the profit of your rent tax free?

Any ideas would be appreciated regards


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Neil Patterson

11:38 AM, 29th June 2017, About 7 years ago

Hi Tony,

Any rental profit after allowable expenses if the property is unencumbered is taxable income. Then if you sell there is CGT.

However, if you release equity with finance up to the purchase price the amount you release does not incur income tax, but you are then incurring mortgage interest costs. Then under section 24 mortgage interest relief reductions you may not be able to deduct all the interest as a cost against rental profit if it pushes you up into being a high rate tax payer.

If you purchased in the name of a limited company a loaned the money to the company you can take it out tax free as a directors loan, but again you are then paying corporation tax on profit and incurring set up and accountancy costs.

I think we are all in the realms of two certainties, death and taxes. Well maybe unless you are an offshore oligarch!

There may be better minds than me in this subject though.

tony tony

12:27 PM, 29th June 2017, About 7 years ago

ok neal thanks for that

Graham Bowcock

13:17 PM, 29th June 2017, About 7 years ago

Dear Tony

Assuming you are buying as an individual and not through a company, then the issue is one of profit v drawings. The cash you put into the venture will always be yours to do as you wish. If you spend it personally (i.e. not on anything to do with the business) then it is classed as drawings but you do not pay tax on drawings. The profit will be (in simple terms) income less business expenditure and you will pay tax on profit. There is not necessarily any correlation between profit and drawings.

As Neil said. if you buy through a company, any money you put in will be treated as a director's loan. You can be repaid this (as and when cash allows) and, again, you are not taxed as it is your money. If you charge interest to the company on the loan then you will pay personal (income) tax on the interest that you are due.

If you remain unsure you may need an accountant (I am merely a seasoned investor using a variety of vehicles) to advise you more formally.

Hope this clarifies


tony tony

14:00 PM, 29th June 2017, About 7 years ago

Reply to the comment left by "Graham Bowcock" at "29/06/2017 - 13:17":

thanks graham

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