- Location
- Scottish Highlands
Don’t think you have to wait seven years between gifts, just seven years after the last one. The tax is reduced each year too, so even if you have only three to live, better to give anyway.
Pension or property
- Thread starter Grassman
- Start date
Don’t think you have to wait seven years between gifts, just seven years after the last one. The tax is reduced each year too, so even if you have only three to live, better to give anyway.
Sorry- didn't explain it clearly, if some one had gifted their heirs a BTL property/cash sum etc on 30th of March 2014, and providing they could show that
they had not received any benefit from the asset they had gifted, then from 31st March 2021 they could start with a further gift.
- Location
- Scottish Highlands
incorrect.
How Inheritance Tax works: thresholds, rules and allowances
Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.
- Location
- Lincolnshire
Suppose you could buy a couple of new big Fendts for the farm and watch the money roll in from massive 8T acre wheat crops, anyway you seem to have a very rosey picture of how pension funds perform, have you not been warned you can end up with less than you put in, they are only gambling with your money remember.
- Location
- Scottish Highlands
Don’t worry, I’m not naive about losses and very aware too - in-laws had a lot with Equitable Life. Last decade has been good though, and it would take a lot to rewind that.
I’ve also looked at BTL property on a few occasions both inside and outside of Ltd Co, and frankly the tax makes the numbers way off for me.
it's not over
Member
- Location
- thunder rd co.antrim
How would you know if you didn't wake up
- Location
- Hereford
I think you don't really know what you're talking about!!!
- Location
- Scottish Highlands
Give me all the numbers then. Start with £150k in the business/ company, and take that through to buying a BTL property. It becomes £150k in my pension straight away - what would it give as a deposit and what rent would you get? Bear in mind I want capital growth and not income.
Thanks, should have checked and not just relied on memory.incorrect.
How Inheritance Tax works: thresholds, rules and allowances
Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.www.gov.uk
Your 150k could be used as a deposit, maybe 25% so 600k to spend. That would be 4 2bed terraces in local town, let at 9k/year each. So 36k to pay the mortgage tax and running costs. After 25 years you’ve paid the mortgage off, rents have probably risen so your income has grown and you’ve an asset hopefully worth more than 600k. If you’d invested 600k in houses in 1996 that would now be?
For me the point of difference with btl is the ability to leverage your limited capital at the start. You can’t really do that with a pension. (Yes maybe in a complicated sipp) Down side is tax and increased regulation.
- Location
- Scottish Highlands
That suggests buying through the business/ company, if you’re getting it all for deposit. And would the income cover all the costs? Remember that interest is not tax deductible (although might be through ltd Co) so of that £36k I only have 60% maximum available for paying bills etc. .
I should add it’s becoming more tempting as time goes on and I’m maxing out pension funds for me and Mrs.
- Location
- Lincolnshire
Ok you dont see it, but for me a BTL income of around £1400/ week means i didnt go driving a tractor over easter, it will get drilled tomorrow, farming has taken a back seat and fallow/ wild flowers seem very appealing.
- Location
- Scottish Highlands
Fair enough, but for me an income of £1400 a week means a bigger tax bill when I don’t want it. Right now, I don’t want any income from my savings, just growth. I’ll take the £1400 a week when I retire, but not now.
Edit: do you really mean £1400 a week (£72,800 a year) of income? Would be interesting to know what capital investment level you’ve got to get that sort of return. Presumably that’s income and not profit?
- Location
- Hereford
But my BTL property have done both . Grown and given income which has been used to purchase more BTL which have also grown .
Just as an example . house bought in 1994 for £61000 produced an ave rent over 20 yrs of £675 mth (started at £475 mth to 800 in yr 20 . That property has produced income of around £162000 in 20 yrs from rental . The property increased in value from 61k to approx 150k in 2014 which is an increase of 89k . This equates to £4450 yr or £370 mth.
Put the two totals together that brings a total income of £1045 mth over 20 yrs from 1994 to 2014 . We have spent around twenty K on the property to date (up to present day ) plus insurance .
My point is I really can't see any pension performing that well .......this particular house is now worth around one seventy five K .
I haven't followed this thread, but has anyone asked you what land cost 45 years ago?
Because I'm not sure you might've had more than £300k of land if you put 1k /per year into dirt.
(accepting that it isn't that simple...)
and look at all the fun you could've had meantime (if you're like me, loosing money farming it
)I was putting 1k /annum in an nfumutual pension, from my teens, after the local rep lied to me* about the terms (he assured me I could access the capital with only an interest penalty)
When my business was growing, and bank rates hit double figures, I found out his lies, and stopped paying in. Never regretted it.
*I've since found out he told the same lie to others of my local age cohort.
I've spread my bets since, but mostly on things I can stand on or in, or pick up and carry...or at least load in a stockbox.
Seriously wondering now, with cash at hand, 60's within sight, and land prices spiralled into the seeming stratosphere.
The one let house is a rambling old thing that often needs big chunks of the rent spending, and we've had 1 out of 4 Rsoles in it. That's not as simple as folk might think.
On the upside, suddenly a herd of motheaten sucklers is worth double what it was....for the moment.
- Location
- Scottish Highlands
Running the numbers:
£61k purchase cost means
£100k opportunity cost (that’s what could have gone into a pension back in the day)
Pension would now be (say, based on 8% compound growth) £800k. Even at 6% growth it would be worth £480k.
instead you have had:
£40k tax paid at time of getting the money
Rental income £162k minus £20k costs = £142k, so say £90k after tax over the years.
Equity increase of £115k, which will have some liability for CGT.
I’m not you haven’t done well out of it, and the effects of compounding any income into new property aren’t shown there, but the double whammy of loss of mortgage relief, CGT at liquidising the asset, tax relief on putting into pension, income when you’re already earning and using up tax allowances, etc. and I’d say it’s not as compelling as you make out. Add tenants into the equation and the potential for a call out when I’m busy elsewhere and ...
Maybe when I run close to the pension limits and get closer to a time when I’ll want income rather than capital growth it might be better, but for now I’m happier with paper investments and no maintenance.
- Location
- Hereford
We see things very different ..... thankfully