Tax Saving Advice

NKS2017

We have 2 properties in my name
My wife has 1 property in her name
We have 2 properties in joint names
My current salary is £30k (rising to £34k in Sept 2021 and then £40k in Sept 2022)
My wife only has property income at the moment.

We are not planning to acquire more properties in the future.

My wife’s circumstances on earnings will not change in the future.

We currently take the profits from the properties as extra income.

Our properties increased in value since we have bought them.

Property 1 purchased for £68k currently valued between £75k-80k (Interest Only)

Property 2 purchased for £83.5k currently valued between £100-110k (Repayment)

Property 3 purchased for £69k from family members but valued at the time at £130k however remaining capital was gifted. Currently valued at £175k (Interest Only)

Property 4 purchased for £85k currently valued between £100-120k (leasehold currently declining. Will cost £7k to renew but cannot afford this and so value of property may decrease). Currently Repayment however in the process of applying for consent to lent for 12 months.

Property 5 purchased for £132500 (cash), currently valued at £175k. Remortaged in October 2020 for £130k in order to release funds to purchase our own home. (Interest Only)

We purchased our current home in Feb 2021 for £350k. We currently owe family £101k, our mortgage is £160k (Repayment), and the remaining we paid cash.

Our home requires renovation work that is estimated to be in the region of £100k

We have £55k in savings towards the renovation.

So we are looking at what our best options are in order to pay back family, reduce our tax bill and be able release funds to complete the renovation.

maxsteam

You can write to HMRC and notify them which is your main residence (your "current home"?). That nominated property will be exempt from CGT. All other properties will be subject to CGT when you sell them. The valuations are irrelevant and CGT will be calculated using the selling price. You should make this nomination within two years of purchase otherwise HMRC will decide which is the main property.

The interest on your mortgages can be claimed against rental income as an allowable expense on your rental properties. The renovation costs and the mortgage costs on your main residence are not allowable expenses.

If you cannot find the £7k to renew the lease on property 4, you are not going to be able to repay £101k to family members or afford £100k of renovations for the time being.

yorkiechick

maxsteam said:

The interest on your mortgages can be claimed against rental income as an allowable expense on your rental properties. 

This is no longer an allowable expense in its entirety, it has been phased out over the last 4 years

[Deleted User]

yorkiechick said:

maxsteam said:

The interest on your mortgages can be claimed against rental income as an allowable expense on your rental properties. 

This is no longer an allowable expense in its entirety, it has been phased out over the last 4 years

There were a number of issues with that post, not least that you could nominate any of the properties to be a main residence and it would then be exempt from CGT. 

There is also the question of nomination itself as it appears that only the current home was ever lived in by either the op or his wife?

Runninglaps

This isn't just a tax question you've asked. You need to think of it from a business point of view too. Do any of your properties perform well or badly? Is 1 a complete dog you would be better off without? How big is the mortgage on them, can remortgaging get you what you need and leave you with sufficient profits.



You really need to get to grips with your business and then do some tax planning for short term and long term.