Pensions & Property

LeCoop

Following a bereavement, me, my brothers & sisters have a property to sell & split the proceeds.

I am thinking of paying them off and keeping the house as a buy-to-let, given that there have always been lodgers and we still receive regular enquiries.

I understand that property can now be included within a pension plan... anyone know how this works, how it might affect my current company pension and what (tax) advantage I might gain over a straightforward purchase?

... or should I even just ignore my emotional attachment to the property, flog it and invest my share in something entirely different?

dunstonh

I understand that property can now be included within a pension plan...

That is not correct.

or should I even just ignore my emotional attachment to the property, flog it and invest my share in something entirely different?

It depends. Buy to lets in the UK are not generally good value at the moment to keep so it would have to be something special to make it worthwhile.

What is the rental yield you would get for the property?
What is the tax you would pay on that rent (basic or higher)?

LeCoop

c. £500 per month, higher rate tax earner... as long as I get enough to cover council tax, utilities & some maintenance, then I'll be happy... likely to hang on to it for 10yrs or more if I go ahead, by which time I will be retired.

In addition, would probably persuade my recently separated & unemployed son to move in & keep an eye on the property, to get him from under my own roof... mutually beneficial to us both :-)

I posted the question because I had heard of people introducing property into their pension portfolios (if that's the correct term) as a result of changes in the rules... I guess the question is why do they do it and what benefit do they derive from doing so?

dunstonh

c. £500 per month, higher rate tax earner... as long as I get enough to cover council tax, utilities & some maintenance, then I'll be happy... likely to hang on to it for 10yrs or more if I go ahead, by which time I will be retired.

What is the property value?

£500pm rent would mean the property value would have to be around £80,000 to make it worthwhile. Possibly closer to £70,000 given your tax status.

Whilst the rent is £500, you will lose 40% of that tax. The property value will also be subject to 18% capital gains tax on disposal with no taper relief available from next week. Thats assuming you see any gains over the next 10 years as currently house prices are dropping and in most areas.

I posted the question because I had heard of people introducing property into their pension portfolios (if that's the correct term) as a result of changes in the rules... I guess the question is why do they do it and what benefit do they derive from doing so?

They are not deriving any benefit because they cannot do it. Only commercial property, property share funds, REITS and bricks and mortar property funds can be held in a pension. Residential property (your own or those you rent out) cannot.

LeCoop

Much appreciated, very informative

Regards