Second Property closer to work

MrKiss

Hi

I work in central London and have a relocation allowance of 25k that has been offered to me. My wife doesn't want to move right now and so I am trying to work out what makes the most sense financially.;

Situation
- Commuting >2 hour each way. Mostly by train
- Own a property with a small mortgage (~£500/month) in countryside
- House prices where I live are fairly stable
- 25K relocation is dependent on me moving closer to work in some way
-income: >£100K
-Age: 36

Options:
a) Forget the 25K exists
b) buy a second property to stay in 1-2 nights a week.

Very interested to know how to utilise the 25K to invest in a property that i can use as a crash pad and an investment

lisyloo

Are you able to work from home at all?
>4 hours commute sounds a killer every day and that’s presumably with no delays, which trains are you using? That makes a huge difference, southern give up now.

A second property would be subject to cgt and additional stamp duty.
Prices are falling in London.
Probably not a great investment.
If it’s just 1 or 2 nights a week have you considered air b&b, cheap hotel or get lodgings via work?

This doesn’t sound great to me.
Is the job fantastic to justify the cost, commute and nights away from your wife?

[Deleted User]

MrKiss wrote: »

Hi

I work in central London and have a relocation allowance of 25k that has been offered to me. My wife doesn't want to move right now and so I am trying to work out what makes the most sense financially.;

Situation
- Commuting >2 hour each way. Mostly by train
- Own a property with a small mortgage (~£500/month) in countryside
- House prices where I live are fairly stable
- 25K relocation is dependent on me moving closer to work in some way
-income: >£100K
-Age: 36

Options:
a) Forget the 25K exists
b) buy a second property to stay in 1-2 nights a week.

Very interested to know how to utilise the 25K to invest in a property that i can use as a crash pad and an investment

Most of that £25k allowance will be blown paying SDLT on an additional residential property in or near London.

Other than the £25k how much have you go to spend on this second property? How long until your wife decides to join you in London?

00ec25

so your income >100k
certainly a 40% taxpayer then

only the first £8,000 of a relocation "allowance" is tax free and then only if spent on specific qualifying costs
https://www.gov.uk/expenses-and-benefits-relocation/whats-exempt

depending on how it is paid (see link), would 25k - 8k push you into additional rate tax? 45%

perhaps you should think in terms of post tax disposable income, not 25k gross, it may affect your plans ?

MrKiss

lisyloo wrote: »

Are you able to work from home at all?
>4 hours commute sounds a killer every day and that’s presumably with no delays, which trains are you using? That makes a huge difference, southern give up now.

A second property would be subject to cgt and additional stamp duty.
Prices are falling in London.
Probably not a great investment.
If it’s just 1 or 2 nights a week have you considered air b&b, cheap hotel or get lodgings via work?

This doesn’t sound great to me.
Is the job fantastic to justify the cost, commute and nights away from your wife?

Thanks for reply. The situation is what is is and so not gonna change. I have been doing the commute for 9 months now and actually less of a problem than it sounds. The job is definitely worth it from a career, job satisfaction and financial perspective. I work for a well known US tech company.

If i was to buy, it would be just outside of London where the commute would be just under an hour.

MrKiss

00ec25 wrote: »

so your income >100k
certainly a 40% taxpayer then

only the first £8,000 of a relocation "allowance" is tax free and then only if spent on specific qualifying costs

depending on how it is paid (see link), would 25k - 8k push you into additional rate tax? 45%

perhaps you should think in terms of post tax disposable income, not 25k gross, it may affect your plans ?

If I received this tax year, would not have to pay due to earning less than 45% threshold (due to changing jobs etc). However, as i will do a full year in the next tax year I would most likely have to pay 45% on 25k.

By post tax disposable income, i assume you mean, once the money lands in my bank, how much real cash I will have to spend.

MrKiss

Lover_of_Lycra wrote: »

Most of that £25k allowance will be blown paying SDLT on an additional residential property in or near London.

Other than the £25k how much have you go to spend on this second property? How long until your wife decides to join you in London?

Would probably put another 30K savings towards it
We have about 80-100K equity in current property.

Wife has no plans to move to London. Currently stuck where we live due to elderly grandparents

00ec25

MrKiss wrote: »

If I received this tax year, would not have to pay due to earning less than 45% threshold (due to changing jobs etc). However, as i will do a full year in the next tax year I would most likely have to pay 45% on 25k.

By post tax disposable income, i assume you mean, once the money lands in my bank, how much real cash I will have to spend.

note, in order to qualify for the £8,000 tax free you would need to change your main residence.
Given your wife's situation clearly you do not meet that condition, so the entire £25k will be treated simply as a one off salary payment subject to PAYE

so you will not have 25k to spend on your investment, you will potentiality have only £13,250 once tax and NI has been deducted from it

MrKiss

00ec25 wrote: »

note, in order to qualify for the £8,000 tax free you would need to change your main residence.
Given your wife's situation clearly you do not meet that condition, so the entire £25k will be treated simply as a one off salary payment subject to PAYE

so you will not have 25k to spend on your investment, you will potentiality have only £13,250 once tax and NI has been deducted from it

Well. When you put it like that, it sounds much less appealing, I would much rather put my current income to work elsewhere.

That advice makes perfect sense.:beer:

lisyloo

MrKiss wrote: »

Thanks for reply. The situation is what is is and so not gonna change. I have been doing the commute for 9 months now and actually less of a problem than it sounds. The job is definitely worth it from a career, job satisfaction and financial perspective. I work for a well known US tech company.

If i was to buy, it would be just outside of London where the commute would be just under an hour.

We rent in London away from our main home but we are both together so can enjoy what London has to offer together and also have guests up for weekends.
It has its issues and isn’t the cheapest way to do things but offers us a very good commute.
Your salary does justify a rental but not really worth it if your wife won’t stay there and you don’t want to live apart.

In your position I would either commute if you are ok with that or I would look for air b&b or hotel deals for 1 or 2 night stays (days inn Waterloo is sometimes around £60). There are some very basic hotels like easy and tune.

Buying means you have to maintain, insure 2 properties as well as cgt and stamp duty.
You might find insurance very expensive if you are honest about being there 1 or 2 days a week or find you aren’t insured.

If capital values were flying upwards I’d say buy but there is no capital gain in sight at the moment.

MrKiss

lisyloo wrote: »

We rent in London away from our main home but we are both together so can enjoy what London has to offer together and also have guests up for weekends.
It has its issues and isn’t the cheapest way to do things but offers us a very good commute.
Your salary does justify a rental but not really worth it if your wife won’t stay there and you don’t want to live apart.

In your position I would either commute if you are ok with that or I would look for air b&b or hotel deals for 1 or 2 night stays (days inn Waterloo is sometimes around £60). There are some very basic hotels like easy and tune.

Buying means you have to maintain, insure 2 properties as well as cgt and stamp duty.
You might find insurance very expensive if you are honest about being there 1 or 2 days a week or find you aren’t insured.

If capital values were flying upwards I’d say buy but there is no capital gain in sight at the moment.

Looks of really good points thanks.

That would be the ideal situation for me. But unfortunately, not going to be an option. At the moment, i actually stay down once a week at my mum's which is probably the greatest part of working in London.

However, knowing that one day we will move closer to work (most likely Hertfordshire or Cambridgeshire) I wanted to find a way to utilise the relocation allowance and prevent being totally priced out of the market. I live in Norfolk in an area where properties are cheap but growth is very flat

So actually i probably should have also asked, "how can i prevent myself from being totally priced out of the market.

interested to know if you offset the cost by renting out any of the properties?