Pension Vs Property ....what is best?

atush

I didn't/ That is a one off boost that could be overtaken by long term higher returns from BTL, especially if the BTL is set up so that he pays a lower rate of tax even zero if the profits are paid into a pension.

Profits from BTL cannot be paid into a pension. They are not earned income. There is no good tax treatment fot BTL. both income and gains re taxed.

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Quote:
Originally Posted by AnotherJoe View Post
There's no reason to think that BTL will have that. None at all. And much to indicate the opposite.

There most certainly is a reason. It is what I have been getting. The rental returns from my property have been a little higher than the growth in my pensions. Add in the capital growth for the properties and they are well ahead.

The tax regime for BTLs is still changing an in a few years will not be tax friendly at all with most deductibles disallowed. So your profits may plunge.

Then, your pension. We cant compare as we dont knwo what you are invested in, within your pension. While the last 12 months havent been great for pension values, those with income funds may still be in positie territory. Over the last decade our pensions have performed very strongly, higher than most BTL. And tax free. once you take out the taxes paid on your BTL income, pension wins hands down

dont_use_vistaprint

Terron wrote: »

I didn't/ That is a one off boost that could be overtaken by long term higher returns from BTL, especially if the BTL is set up so that he pays a lower rate of tax even zero if the profits are paid into a pension.

It it lawful to structure a business to purposely create no taxable income or dividend but input all proceeds into a directors pension? Is that avoidance or evasion?

chucknorris

Bimbly wrote: »

As a higher rate tax payer, the tax advantages of paying into a pension are huge. As said above, to put £1 into a pension only costs you 60p.

Don't get me wrong, I am not against pensions, despite having a lot more invested in BTL (although I have just started selling up), but it isn't as simple as that. OK I get 40% relief going in, but I'll also pay 40% taking it out (possibly 60% too). Yes I realise the TFLS reduces that 40% to 30%. I will also have quite a bit invested in pensions too when I retire (almost £1m).

Despite that, I would say to the OP, do you really want to be a landlord during your retirement? I certainly don't, which is why I've started to sell. My reasons are:

1. I've been a landlord for a long time now, and I've had enough.
2. My equities never ring me up complaining of a plumbing leak.
3. If you eventually want to sell and spend the equity in the property, you have to plan to do it probably about halfway through your retirement (to avoid selling in a recession).
4.properties are hassle, and I want to be have more freedom during my retirement.
5. Equities receive better tax treatment, both in income and capital gains tax.

atush

OK I get 40% relief going in, but I'll also pay 40% taking it out (possibly 60% too). Yes I realise the TFLS reduces that 40% to 30%. I will also have quite a bit invested in pensions too when I retire (almost £1m).

Most wont get 40% tax on the way out.

Thrugelmir

Terron wrote: »

Add in the capital growth for the properties and they are well ahead.

When you liquidate your portfolio. You'll undoubtably have a period with no income generated. The costs of disposal to factor in. Then tax to pay on the growth. Might take the shine off the returns in the longer term.

chucknorris

atush wrote: »

Most wont get 40% tax on the way out.

I know, but as I said, it isn't as simple as that, (receiving 40% relief and paying less tax on the pension income, some might even pay 60%). When I first invested in pensions I was only receiving 20% relief, but I will pay 40% (possibly even 60% at the start) tax when I receive my pension.

Alexland

dunstonh wrote: »

Would you borrow money to buy equities? No.

We do in that we maintain a higher mortgage balance than necessary such that we can grow our tax efficient S&S holdings and use annual allowances. In the right circumstances then I am very comfortable borrowing a bit more (still within our comfort zone) to buy more S&S fund units. It would still be a lot less risky than highly leveraged BTL.

Alex

chucknorris

Alexland wrote: »

We do in that we maintain a higher mortgage balance than necessary such that we can grow our tax efficient S&S holdings and use annual allowances. In the right circumstances then I am very comfortable borrowing a bit more (still within our comfort zone) to buy more S&S fund units. It would still be a lot less risky than highly leveraged BTL.

Alex

I do that too, I've almost (expecting to complete within a fortnight) sold a house and I could use the equity released to pay off other mortgages. But I'm only paying 0.38% and 0.68% over the base rate on my tracker mortgages, so I would rather invest it elsewhere. I'm still thinking where exactly to invest it though, probably mainly equities and single corporate bonds.