How to reduce BTL tax if job income is high

Skag

My income is 60k/year, and I have another 30k incrom from BTL property, for which I am paying 40% tax.

Is there any way to reduce the tax on the property income?

kidmugsy

A gross pension contribution of about £47k would do the trick at the moment, in that you'd avoid higher rate tax altogether. You'd need to carry forward some annual allowance because that proposed contribution is bigger than £40k.

Longer term ..... I don't know. BTL is going to get less attractive for higher rate taxpayers who have mortgages on the BTL property. Maybe you could consider investing in VCTs.

Bluebirdman_of_Alcathays

Your income is way north of the area in which you can try and massage your wealth to move to a different marginal band. In fact, you're closer to losing your personal allowance your income is so high.

As mugsy has said, put anything you don't need on a daily basis into a pension - this will provide you with 40% relief up front, albeit you won't see it until 55 (or whatever the pension rules will be in the future).

Skag

So if I don't want to put everything in my pension? What do people with higher income do? Take a 40-45% hit?

Savvy_Sue

Skag wrote: »

So if I don't want to put everything in my pension?

You don't have to put everything into your pension: anything you DO put into your pension will reduce your tax liability to some extent.

Skag wrote: »

What do people with higher income do? Take a 40-45% hit?

Either that, or take 'proper' (probably paid for) advice from a suitably qualified professional. With an income of £90,000, that seems like a no-brainer to me ...

POPPYOSCAR

Run your BTL as a ltd company?

Skag

Savvy_Sue wrote: »

With an income of £90,000, that seems like a no-brainer to me ...

Indeed, this is in the very near plans. Though, I always to run my thoughts through this forum because I usually get good views.

Skag

POPPYOSCAR wrote: »

Run your BTL as a ltd company?

It turns out that it's not worth it, since the properties will be owned by the Ltd company, and once I want to take out cash, I will still need to pay tax on it, so in essence that increases the total tax paid.

POPPYOSCAR

Skag wrote: »

It turns out that it's not worth it, since the properties will be owned by the Ltd company, and once I want to take out cash, I will still need to pay tax on it, so in essence that increases the total tax paid.

Have you discussed this with an accountant?

Skag

POPPYOSCAR wrote: »

Have you discussed this with an accountant?

Yes I have.

Bluebirdman_of_Alcathays

Skag wrote: »

It turns out that it's not worth it, since the properties will be owned by the Ltd company, and once I want to take out cash, I will still need to pay tax on it, so in essence that increases the total tax paid.

And even to get the properties into the limited company, there will be material CGT and SDLT considerations.

Have you given consideration to selling the BTL? You haven't mentioned how it is financed - if it's via a mortgage the chancellor is really out to get you!