Early-retirement wannabe

[Deleted User]

Our rental was our main accommodation until 3 years ago so our CGT liability shouldn't be high. You get 3 years I believe, after you move out, before the CGT kicks in so if we sell in a couple of years time, with the CGT allowance we don't expect it to be a huge amount. It's quite a small house

Terron

victoria61 wrote: »

Our rental was our main accommodation until 3 years ago so our CGT liability shouldn't be high. You get 3 years I believe, after you move out, before the CGT kicks in so if we sell in a couple of years time, with the CGT allowance we don't expect it to be a huge amount. It's quite a small house

The three years was cut to 18 months.

Terron

Dazed_and_confused wrote: »

bluenose1

The tax changes have not affected us as lower rate tax payers

But will this still be the case once the transitional years are out of the way and none of the interest can be claimed as an expense?

It would be in my case if I werent;t foing to get my pensions.

bluenose1

Dazed_and_confused wrote: »

bluenose1

The tax changes have not affected us as lower rate tax payers

But will this still be the case once the transitional years are out of the way and none of the interest can be claimed as an expense?

I don't think the changes makes any difference to basic rate tax payers.
Although we can't claim the interest as an expense we get a tax credit which equates to same tax reduction. It says on gov.uk site estimated 82% of landlords won't pay extra tax
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

Really hard to explain so see the example from Which below

Mortgage interest tax relief in 2020:
a landlord that charges £950 per month rental income, with mortgage interest payments of £600 per month.
They'll pay tax on the full £11,400 rental income they earn
They'll still pay £7,200 in mortgage interest
They'll get a tax credit of £1,440 (£7,200 x 20%)
A basic-rate taxpayer will pay £840 - no increase
A higher-rate taxpayer will pay £3,120 - double the tax

Terron

badmemory wrote: »

I think what a lot of the baby boomer bashers don't realise is that if you didn't have access to one of these good pensions then you actually had no access to any pension at all apart from state. I was talking about this with a friend who couldn't understand why I had no personal pension until 1993. After all he had one since he was 21 (1967). But what he failed to mention was that he had his own business then & guess what, none of his employees had a pension.

In my first job the pension scheme was only open to managers. So I took out private ones in the mid-80s. I thought they weren't ding well until I found out about the 10.6% GARs,


From 1989 I was in a final salary scheme for 5.5 years. The company no longer exists. Nor does the one that bought it. But the pension scheme still does.


Then I was in a hybrid scheme where the DB underpin is near certain to come into play. That was stopped and replaced by a pur DC scheme around 2001.

Terron

bluenose1 wrote: »

I don't think the changes makes any difference to basic rate tax payers.
Although we can't claim the interest as an expense we get a tax credit which equates to same tax reduction. It says on gov.uk site estimated 82% of landlords won't pay extra tax
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

Really hard to explain so see the example from Which below

The changes can affect basic rate tax payers, since the tax rate will be calculated without the deduction of finance costs.


Roughly I get £50k per year. I pay £10k in allowable expenses, and £15k in interest. I would remain a basic rate tax payer if my income stayed the same.
My DB pensions will give me roughly £15k per year, taking my income after all expenses to £40k.so you might think I would stay a basic rate tax payer, but that is not the case.

The tax will first be calculated on my total income minus allowable expenses - 50+15-10 =£55k, so I would be payinghigher rate tax. Then I would get the 20% tax relief on the finance costs which would not cancel out the extra tax of ~£2k/.


That will not be happening as I plan to sell a former home next year.. The CGT should be less than my allowance.

bluenose1

Terron wrote: »

The changes can affect basic rate tax payers, since the tax rate will be calculated without the deduction of finance costs.


Roughly I get £50k per year. I pay £10k in allowable expenses, and £15k in interest. I would remain a basic rate tax payer if my income stayed the same.
My DB pensions will give me roughly £15k per year, taking my income after all expenses to £40k.so you might think I would stay a basic rate tax payer, but that is not the case.

The tax will first be calculated on my total income minus allowable expenses - 50+15-10 =£55k, so I would be payinghigher rate tax. Then I would get the 20% tax relief on the finance costs which would not cancel out the extra tax of ~£2k/.
.

Hi, yes I can see how the changes affect you, even though you are currently basic tax payer.
As my total income under the changes will be £45k including the property income then I don't think I am affected. My husband and I split the income as in joint names.
Though hadn't thought about this before but if we buy any more property I will have to put the rental income in my husbands name as he has now retired and has less income than me.

Terron

OldMusicGuy wrote: »

I did toy with moving some of my cash into a rental property but decided that would be too much like hard work and stress in retirement, and the tax regime doesn't encourage that now.

I lost my job when I was 54. I had worked in IT so my chances of getting a comparable one was tiny, My pensions were set to pay out when I was 60. I could have lived off my savings until then, but decided to invest in property instead, I use letting agents to manage my properties and have little work to do. Accounts being the main thing,


The tax changes have made little difference to me, They might affect me next year, but I will be making changes to avoid them, changes which I had actually planned to do anyway.



Property worked better for than further pension contributions or ISAs as I was able to invest about £300k in the first year which I could not have done with the other ways. I happened to be familiar with an area with high yields and have been gettin over 7% net in income.

Thrugelmir

bluenose1 wrote: »

Not sure what our long term strategy but certainly for next 10 years or so going to keep them.

Exit routes need to be considered well in advance. As could be costly.

Dazed_and_confused

bluenose1

Sorry just seen your response. I think Terron's explanation pretty much covers it although there can be other complications for some i.e. someone claiming Married Couple's Allowance (admittedly maybe not as likely to still have a loan) might remain a basic rate payer but would have higher income and could therefore lose some of their Married Couple's Allowance and have a higher tax bill as a result.