advise for a doctor with zero financial IQ

Terron

Malthusian wrote: »

With a diversified portfolio of funds you can use your capital gains tax allowances each year by transferring some into joint names, switching enough to use your capital gains allowances into similar investments, and then immediately transferring them back into your wife's name to keep the income tax-free. With BTL that's practically impossible. So BTL is an extremely poor way of using your tax allowances.

With BTL you don't need to bother with allowances. You can just get almost tax free income, though it is becoming more difficult. If a property goes up in value you can remortgage for a higher amount and use the difference just like income.

I don't use that strategy myself as I am invested in an area with high yields but traditionally lower capital growth. My point is that using your allowances is not the aim, maximizing your post tax income whilst controlling risk is the aim. Using allowances, or remortgaging are just techniques that might be used.

Malthusian

Terron wrote: »

With BTL you don't need to bother with allowances. You can just get almost tax free income, though it is becoming more difficult.

Capital gains however will not be tax free, as they would for a portfolio of funds where growth is less than £20,000 per annum (for two spouses), as the whole amount - minus one year's allowances - will be taxable when you come to sell the property for whatever reason. With a portfolio of funds you can use every year's capital gains allowance, with BTL you can only use one year's allowance - the year you sell the property.

With income tax allowances the position is exactly the same with BTL vs funds.

If a property goes up in value you can remortgage for a higher amount and use the difference just like income.

How does that help the capital gains tax liability? Are you saying that instead of selling the property to release equity you should borrow against it?

Having to borrow money to release equity without paying a big tax bill instead of simply selling the funds is still a disadvantage of BTL, particularly to provide income in retirement.

louloubelle79

I’m a nurse in the NHS and recently gone along this route with AVC in my scheme and a MPAVC with Prudential.

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

If you are a member of the NHS Pension Scheme you can also use a NHS Stakeholder Pension to top up your main NHS Pension Scheme benefits. You can do this instead of, or as well as, other top up arrangements.

Terron

Malthusian wrote: »

How does that help the capital gains tax liability? Are you saying that instead of selling the property to release equity you should borrow against it?

Having to borrow money to release equity without paying a big tax bill instead of simply selling the funds is still a disadvantage of BTL, particularly to provide income in retirement.

Yes. It is a well documented strategy.

Capital gains from property are completely tax free until you sell. If you never sell then when you die the CGT liability goes away. But you can access the money from the price increase by remortgaging.

The option of borrowing to provide tax free money is an advantage of BTL not a disadvantage. Last time I moved I remortgaged my old home for £135k having paid £80 for it originally. I used that money to buy my new home (for which I could not get a mortgage as I had no job. The mortgage and other costs have been paid by the rent and there has been a small profit, and the price has risen a further £100k. (which will be tax free due to PPR and other allowances).

There is a risk if you borrow too much.. If you don't leave enough equity in to pay the CGT and something forces you to sell you would be in trouble. Some people who were using the strategy with 85% or higher LTV will be in such a position due to the tax changes.

Those changes and the PRA changes make it more difficult to get it to work, but not impossible.

NHS

Hi, I am have started working in the NHS since 7/2016 but planning to go back to Hong Kong due to family issues (and very likely to stay there for good). I currently still in the NHS pension scheme and was looking to transfer the pension money to a Qualifying Recognised Overseas Pension Scheme (QROPS) in Hong Kong when i leave in 7/2018. But just last month, all the Hong Kong pension schemes are not longer listed as QROPS on the HMRC website and therefore I would not be able to transfer the money to any of the HK pension schemes? May I ask what is the best way to maximise the amount of money I can get out of the NHS pension please. Thanks so much

Malthusian

Terron wrote: »

The option of borrowing to provide tax free money is an advantage of BTL not a disadvantage.

With a portfolio of funds you can provide tax free money without borrowing. Two people with no spare income allowances can sell down from funds and generate a significant amount of "income" with no tax bill unless the gains exceed £22,600 per annum - and any excess is taxed at only 10% of the gain rather than 20% of the yield. With BTL, to generate tax free money you have to borrow. This has risks as you outlined very accurately in your second to last paragraph. The need to borrow money is the disadvantage.

Terron

Malthusian wrote: »

With a portfolio of funds you can provide tax free money without borrowing. Two people with no spare income allowances can sell down from funds and generate a significant amount of "income" with no tax bill unless the gains exceed £22,600 per annum - and any excess is taxed at only 10% of the gain rather than 20% of the yield. With BTL, to generate tax free money you have to borrow. This has risks as you outlined very accurately in your second to last paragraph. The need to borrow money is the disadvantage.

As I outlined the risk comes from borrowing too much, not from borrowing as such. BTL is not for people who are afraid of borrrowing, but you do need to be cautious.