Buy to Let or Pension investment?

MaxiRobriguez

scoobydoo789 wrote: »

Great suggestions so far, thanks for this keep them coming. Sounds like BTL not worth the hassle.

To one of the earlier posts, I have maxed out what I could get my employer to contribute to my pension; its a good idea though.

Given all these options I've never heard of like lifetime ISAs it sounds like a trip to some sort of IFA might be worthwhile to get some sort of plan in place.

Depending on your earnings then just because you've maxed out what your employer contributes to pension doesn't mean you can't contribute more.

I'm sacrificing 200% more than my employer does, because that figure takes me £20 into the basic rate taxpayer band. If I stuck as sacrificing the same as my employer I'd be paying 40% tax on the money I didn't sacrifice.

AnotherJoe

scoobydoo789 wrote: »

Great suggestions so far, thanks for this keep them coming. Sounds like BTL not worth the hassle.

To one of the earlier posts, I have maxed out what I could get my employer to contribute to my pension.

If you are a high rate tax payer that's no reason not to put £100 into your pension instead of anywhere from £60 to maybe as little as £45 into your mortgage (depends if your employer does salary sacrifice or not)

And if not high rate, similar applies just not as big benefits.

MEM62

Dazed_and_confused wrote: »

From 6 April 2020 your loan interest payments (and any capital repayment) can no longer be claimed as an expense.

Incorrect.

Dazed_and_confused

Well it's what Which are saying

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782

fizio

There is nothing wrong with doing both (assuminmg finances allow) and getting a more diverse set of investments. I am currently maxing the pension contributions to get the tax advantages and also buy some property for BTL.


Both have downsides and both have a solid track record long term so it doiesn't have to be one or the other.


I do agree that pensions via employer should be utilised first though

bostonerimus

haf63 wrote: »

There is nothing wrong with doing both (assuminmg finances allow) and getting a more diverse set of investments. I am currently maxing the pension contributions to get the tax advantages and also buy some property for BTL.


Both have downsides and both have a solid track record long term so it doiesn't have to be one or the other.


I do agree that pensions via employer should be utilised first though

Yes, this doesn't need to be an either or question. Run the numbers and see what works. BTL is a nice diversifier and when the property is mortgage free you have a source of regular income that isn't dependent on the stock market. I'm retired and knowing that I'll get the rent check every month is great. However, you do need to understand the responsibilities of being a landlord, but if you are good it can work out very well. My last tenant stayed for 5 years and a friend of hers is my current tenant and she is in her third year. I didn't bother to advertise because I knew her and she was anxious to move in because the flat is nice and I take good care of it.

enthusiasticsaver

I cannot for the life of me see why anyone does BTL any more so for what it is worth here are my list of pros and cons of BTL v investing in a SIPP.

Investing in a SIPP is cheaper cost wise than BTL and is topped up by the government providing it is within parameters. BTL is expensive with a mortgage normally more expensive than a residential one, extra stamp duty and very expensive to maintain.

Investing in a SIPP can be widely diversified both in terms of asset types and globally to prevent the value being too affected by things like Brexit, recessions etc etc and BTL is solely invested in one asset group in one locality and heavily dependent on the property market remaining buoyant. History tells us that there have been many ups and downs and no guarantee you will not end up in negative equity.

Property is not at all a liquid asset and may prove difficult to sell if you need to realise the cash. A SIPP cannot be accessed until 55 but you could invest in stocks and shares ISAs alongside which can be sold at any time.

There have been recent tax changes meaning that tax is payable on any profit you make from BTL and only allowing for interest charges on mortgage payments not repayment of capital. You could get a good tenant who pays their rent on time but equally you could get a bad one who does not pay on time if at all and refuses to leave involving you in court proceedings which is all stress and expense. Equally they could trash the property.

Up to you but I know which one I would go for.

cloud_dog

OP... You haven't confirmed if you are a HRT payer or not but in the absence of you confirming this and or whether your company pays you via Salary Sacrifice (Salary Exchange) then as a bare minimum you need to make provision for your wife.

You need to at least maximise the below:

Alexland wrote: »

If you are nearly 40 then you both just have enough time to open a S&S Lifetime ISA for a 25% bonus on contributions of up to £4k per tax year. You must open before 40, can contribute until age 50 for (tax free) withdrawal from age 60.

If you are a BRT payer then this is a good option as there is no tax to pay when you withdraw. Additionally you might want to consider making the maximum contributions in to a pension for your wife as the government will give 'her' a free 25% (£2880 net / £3600 gross). Depending on your finances when you retire and your wife's income etc, you may be able to withdrawal her pension in stages free from any income tax.

Are you a HRT payer?
Does your company pay you via Salary Sacrifice?

Thrugelmir

bostonerimus wrote: »

BTL is a nice diversifier and when the property is mortgage free you have a source of regular income that isn't dependent on the stock market.

Making the property tax free is the challenge. Not as easy as people assume. Good years of BTL a decade or so ago was all about flipping a capital gain. For doing nothing.

Alexland

scoobydoo789 - in addition to cloud_dog's helpful summary it's also worth replying on Xylophone's question on if your wife has checked her SP forecast. If she is not paying National Insurance (or receiving NI credits from being a parent, etc) then there may be a case for buying additional years.

Alex