Retirement plans - up pension cont or pay BTL's

RUNCYCLEMAN

Hi all and thanks in advance for reading my post and to any ideas.
I am 46 married with 3 children
I currently work 3 days per week with a gross pay of 33K and pay into employers pension (peoples pension) minimum 1% and 1% er's. Soon to go up to 3%:2% April 6th 2018

The rest of the week I am self employed and on average earn another 2K per month.

I have just remortgaged my house with same provider at 1.45% for 2 years and a repayment of £720 per month.

A couple of days per month is spent on managing my BTL (10 houses) all on interest only and total 770K in mortgages. Quite a worrying figure when added to my mortgage of 141K.
The BTL interest totals £1462 per month (BR plus 1.24 -1.74%)

My question is am I best to make capital repayments to the BTL mortgages (they currently have between 13-17 years left, after that I will need to either remortgage or repay) or to put more into my private pension.

At present I pay £400 per month to Aviva in a high risk category - they have emailed me asking whether the risk should be lowered as I have put 60 down to retire and its in the last 15 years of that. This pot is relatively small at about 77K.

As long as I carry on I will qualify for full £159.55 SSP at 68 (I think)

My friends & family assume I have more disposable income than I am left with - my car is 12 years old so no repayments etc.

Any ideas / strategies would be much appreciated. I would like to retire ASAP at the moment

dunstonh

Higher rate taxpayer means pension has a significant benefit. And now, landlords who are higher rate taxpayers cant get the full benefit of interest relief.

My question is am I best to make capital repayments to the BTL mortgages (they currently have between 13-17 years left, after that I will need to either remortgage or repay) or to put more into my private pension.

Pension gets 40% tax relief. Interest on mortgages is only 20%. Paying off the mortgage means no relief.

Any ideas / strategies would be much appreciated. I would like to retire ASAP at the moment

I dont think it is advisable for anyone on the internet to say as your situation is going to be more than just about immediate tax efficiency but also liquidity and redemptions and future tax liability (CGT for example). Your objectives are going to be an issue as well. For example, do you have a strategy to move them into a limited company?

Terron

How will S24 affect you?
If you don't know what S24 is get over to somewhere like Property Tribes. or try the calculator at https://www.property118.com/consultancy-tool-quick-s24-calculator..
If your profit on BTLs is small compared to your interest payments S24 may turn it into a loss.

RUNCYCLEMAN

Terron wrote: »

How will S24 affect you?
If you don't know what S24 is get over to somewhere like Property Tribes.
If your profit on BTLs is small compared to your interest payments S24 may turn it into a loss.

Very useful tool - it is showing my tax liability will go up by 50%
At present my income from rent is 60K with 18K interest payments which could well go up if rates keep rising.

RUNCYCLEMAN

dunstonh wrote: »

I dont think it is advisable for anyone on the internet to say as your situation is going to be more than just about immediate tax efficiency but also liquidity and redemptions and future tax liability (CGT for example). Your objectives are going to be an issue as well. For example, do you have a strategy to move them into a limited company?

At present I don't or have not planned to move to a limited company set up. No advise as yet been taken though.
I currently overpay BTL by £1700 per month and £1000 personal mortgage.
This being £2700 * 12 (months) * 30 (years) equals 810K . Thus paying majority off when in my 60's

Terron

RUNCYCLEMAN wrote: »

Very useful tool - it is showing my tax liability will go up by 50%
At present my income from rent is 60K with 18K interest payments which could well go up if rates keep rising.

It is being introduced in stages, 25% a year starting this financial year so that there is time to adjust, if you know it is coming.
With S24 you are taxed on your rental income minus allowable expenses plus other income. Then you get 20% of interest as a relief.
So dunstanh is correct that you get more tax relief from pension contributions, but it is more complicated than that.

There are various ways to deal with S24. If the increse in tax is small compared to your profit on BTL you could just live with it. If it is larger than you profit you meed to do something. Companies aren't affected by it, but switching is expensive, costs for companies are higher, and there is tax on taking the money out. I swicthed to buying using a company and plan to sell one of the properties in my own name. and use the proceeds to pay down mortgages, but the best option depends on your circumstances and aims. I hope to end up with no mortgages in my own name. That will increase my tax, but not as much as my income and I will only be paying tax on actual income.

Would the increase in tax reduce your after tax income to what you would consider an unacceptable level?

What is your NUMBER? That is the amount you would be happy to live on when retired - there is a long thread about this.