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Is this right Investment?

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I have bought 4x 1Bedroom flats in India and have rented out with an agent, the flats are worth double then what I paid few years ago so I think it was a good investment, the monthly rent is very good throughout the year and I do pay tax in India for what I earn.
Last year I bought a flat in Portugal for 40,000euros, it was half mortgage and half savings just to be on safe side.
Now I have seen another flat in the same area but I’m thinking is this to much?
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  • eskbanker
    eskbanker Posts: 31,604 Forumite
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    There are too many variables for anyone to be able to give you any sort of meaningful answer to your question, but you might want to consider how much of your total wealth is tied up in illiquid property assets versus other investments, cash, pensions, etc, plus the risks (and benefits) of an already relatively extensive BTL portfolio in multiple countries (with associated currency and market risks). Age, dependents, financial objectives, etc, will (or should) all play a part in assessing what you invest in too....
  • dunstonh
    dunstonh Posts: 116,685 Forumite
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    There is a thread in the pensions section by the OP about him opting out of the workplace scheme and not taking the "free money". Given how that thread turned out, I am not sure anything said by people on this thread would make the slightest difference.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • kingrulzuk
    kingrulzuk Posts: 1,330 Forumite
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    What im asking if I buy more flats in Portugal do I have to pay tax on my income as I will use it to pay off the mortgages.
    Yes I don't have any pension coz as I said on the other thread I like to handle my own money and im already saving money for the future.
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  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    edited 7 June 2016 at 2:42PM
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    kingrulzuk wrote: »
    What im asking if I buy more flats in Portugal do I have to pay tax on my income as I will use it to pay off the mortgages.
    If that is what you are asking why did you not mention tax at all in your post?

    Yes of course you have to pay tax on your profits from your rental business. And the government of Portugal or UK won't care that you are using the profits to pay off the principal owing on your mortgage, the tax is still due.

    For UK tax purposes you are allowed to claim basic rate tax relief on the 'interest' element of the mortgage repayments.

    So if you bought the place for €40,000, lets say you are renting it out for net rental income of €400 a month or €3600 a year (after your agency costs etc). A 9% rental yield which is probably pretty unrealistic but just using it as an example of how the maths works.

    If your worldwide income from all sources is enough to put you in top rate tax bracket here in the UK, you would pay 40% tax on the €3600 which is €1440 tax. Meanwhile if you used a €30,000 mortgage to buy the place and had borrowed on a 4% interest rate your interest cost would be €1200 for the year. HMRC only allows you to get tax relief at basic rate (20%) on the interest cost of your borrowings that were used to buy residential property. So you would be allowed €240 of tax relief on €1200 interest bill, and you could set the €240 relief off against the €1440 tax bill. Meaning you only pay €1200 of tax to the UK tax man on the €3600 income.

    Separately you would owe income tax in Portugal which I think is 28% for overseas residents. But whatever tax you pay in Portugal you can knock off your UK tax bill from the same property, to avoid being taxed twice on the exact same income.

    So your €1200 UK tax bill would be 33% tax on your total €3600. If you'd already paid a couple of thousand euros of tax in portugal for the same property you could knock that off your UK tax bill and just pay HMRC the difference.
  • dunstonh
    dunstonh Posts: 116,685 Forumite
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    Yes I don't have any pension coz as I said on the other thread I like to handle my own money and im already saving money for the future.

    Yet the pension has free money from the employer and tax reliefs.

    Indian property is illiquid and cannot be handled easier than pensions. So, there is no logic in your reason for turning down employer contributions in a pension.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Pincher
    Pincher Posts: 6,552 Forumite
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    It all sounds fascinating.

    How does HMRC check up on any of this?

    Does HMRC demand that you provide certified translations for your Hindi documentation? Certified by WHOM? When you do eventually manage to get it translated, does the HMRC just turn round and say this is totally incomprehensible, and they want you to go through it and explain it all?

    There must be plenty of indian landlords frustrated by the new anti-BTL measures in the UK. I can see a new time share boom on the Costa del Punjab coming.
  • kingrulzuk
    kingrulzuk Posts: 1,330 Forumite
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    bowlhead99 wrote: »
    If that is what you are asking why did you not mention tax at all in your post?

    Yes of course you have to pay tax on your profits from your rental business. And the government of Portugal or UK won't care that you are using the profits to pay off the principal owing on your mortgage, the tax is still due.

    For UK tax purposes you are allowed to claim basic rate tax relief on the 'interest' element of the mortgage repayments.

    So if you bought the place for €40,000, lets say you are renting it out for net rental income of €400 a month or €3600 a year (after your agency costs etc). A 9% rental yield which is probably pretty unrealistic but just using it as an example of how the maths works.

    If your worldwide income from all sources is enough to put you in top rate tax bracket here in the UK, you would pay 40% tax on the €3600 which is €1440 tax. Meanwhile if you used a €30,000 mortgage to buy the place and had borrowed on a 4% interest rate your interest cost would be €1200 for the year. HMRC only allows you to get tax relief at basic rate (20%) on the interest cost of your borrowings that were used to buy residential property. So you would be allowed €240 of tax relief on €1200 interest bill, and you could set the €240 relief off against the €1440 tax bill. Meaning you only pay €1200 of tax to the UK tax man on the €3600 income.

    Separately you would owe income tax in Portugal which I think is 28% for overseas residents. But whatever tax you pay in Portugal you can knock off your UK tax bill from the same property, to avoid being taxed twice on the exact same income.

    So your €1200 UK tax bill would be 33% tax on your total €3600. If you'd already paid a couple of thousand euros of tax in portugal for the same property you could knock that off your UK tax bill and just pay HMRC the difference.





    The flat in Portugal I gave the keys to a family member who looks after it and rents it out on daily, weekly or monthly all cash in hand which he takes his cut and pays the mortgage. So I don’t know about the tax and I’m still thinking as the properties are very cheap in Portugal should I invest more
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  • kingrulzuk
    kingrulzuk Posts: 1,330 Forumite
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    dunstonh wrote: »
    Yet the pension has free money from the employer and tax reliefs.

    Indian property is illiquid and cannot be handled easier than pensions. So, there is no logic in your reason for turning down employer contributions in a pension.



    I totally agree with you its free money but its just that my employer only tops up 1% and I can put in just 1% and in 2 years it will go up to 3% so im thinking to invest as I want to retire @ 40
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  • kingrulzuk
    kingrulzuk Posts: 1,330 Forumite
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    Pincher wrote: »
    It all sounds fascinating.

    How does HMRC check up on any of this?

    Does HMRC demand that you provide certified translations for your Hindi documentation? Certified by WHOM? When you do eventually manage to get it translated, does the HMRC just turn round and say this is totally incomprehensible, and they want you to go through it and explain it all?

    There must be plenty of indian landlords frustrated by the new anti-BTL measures in the UK. I can see a new time share boom on the Costa del Punjab coming.



    I don't know about Costa del Punjab as I buy down south of India, but when I have enough investment I will open an time share resort and sell IPOs still early stage now.
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  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    kingrulzuk wrote: »


    The flat in Portugal I gave the keys to a family member who looks after it and rents it out on daily, weekly or monthly all cash in hand which he takes his cut and pays the mortgage. So I don’t know about the tax and I’m still thinking as the properties are very cheap in Portugal should I invest more

    Very efficient but quite illegal.
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