Pension or property

Deutzdx3

Member
So £1250 income at marginal rate, giving £750 after tax, or £9k a year (but probably other costs too?). I’m guessing you have £100k of equity in one, giving sub-10% ROI, with plenty of hassle potential.

It’s not for me, I’m afraid. For one thing I don’t see why you’d want income at your stage (and the fact you’re paying off the mortgages suggests you don’t really need it either).

First house was bought with my late wife. Put down a big deposit. Was told by an old car dealer who retired with millions then got back into car sales then lost most of what he made to never let property go. Keep hold of it at all costs.
 

Highland Mule

Member
Livestock Farmer
First house was bought with my late wife. Put down a big deposit. Was told by an old car dealer who retired with millions then got back into car sales then lost most of what he made to never let property go. Keep hold of it at all costs.

My first house was £1500 deposit, mortgage of £220 a month and took £600 a month in rent plus stayed in it myself. After twelve years I walked away with £60k after all was done. Still wouldn’t want to bother doing it as an investment.
 

fgc325j

Member
CGT will take some of the shine off these properties when the time comes to liquidate.
BTL properties are NOT exempt from IHT, unlike properties used for holiday lets or the property classed as being your home.
So - when you die HMRC will lump these BTL houses onto your estate, and anything over the IHT threshold will be taxed.
Also, my understanding is that any IHT due, has to be paid BEFORE the tax man gives your heirs control - happy to be corrected
on this - so if anyone has got visions of their heirs selling any BTL properties in order to raise cash to pay the IHT bill, then it will
not be the easy procedure they think it is.
 
Last edited:

Bloders

Member
Location
Ruabon
how do i atatch an excel sheet?
I created an excel sheet comparing a pension and property.
It doe not consider capital growth of the property as @Highland Mule mentioned, for me there is no intention to dispose of the property.
I created it when i moved jobs, to see what i should do. For me of course, with a PAYE job, the tax releif on the pension payments are considerable and can easily shift the balance point.
However, taking a quick look at it this morning, i can see some ommissions in my calcs.

Its a sad fact I dont trust my pension company though...
 

Lincsman

Member
Arable Farmer
Location
Lincolnshire
So you paid out £90k nine years ago and it’s only worth £150? Ouch! That £90k would have cost about £150 to get into you hand back then, as it was presumably from taxed income.
You keep forgetting the £90k the house has sent back to his bank.

But anyway, with £500k in the bank where would you invest for better than 5% more or less guaranteed without capital growth?
 

Lincsman

Member
Arable Farmer
Location
Lincolnshire
how do i atatch an excel sheet?
I created an excel sheet comparing a pension and property.
It doe not consider capital growth of the property as @Highland Mule mentioned, for me there is no intention to dispose of the property.
I created it when i moved jobs, to see what i should do. For me of course, with a PAYE job, the tax releif on the pension payments are considerable and can easily shift the balance point.
However, taking a quick look at it this morning, i can see some ommissions in my calcs.

Its a sad fact I dont trust my pension company though...
Set up a SIPP and then its all down to you how its invested.
 

Lincsman

Member
Arable Farmer
Location
Lincolnshire
BTL properties are NOT exempt from IHT, unlike properties used for holiday lets or the property classed as being your home.
So - when you die HMRC will lump these BTL houses onto your estate, and anything over the IHT threshold will be taxed.
Also, my understanding is that any IHT due, has to be paid BEFORE the tax man gives your heirs control - happy to be corrected
on this - so if anyone has got visions of their heirs selling any BTL properties in order to raise cash to pay the IHT bill, then it will
not be the easy procedure they think it is.
Capital gains dies with you though.
 

Hfd Cattle

Member
Mixed Farmer
Location
Hereford
But wouldn’t you then have to pay CGT on the difference between bought value and deemed value on disposal?
The way I understand it is that provided I live for 7 yrs after I have passed the ownership onto my children then the tax is exempt ........but things will change I think in the near future . I also understand that if I transferred the properties over then I would not under HMRC rules be able to take the income off them . My kids would be entitled to that . They could, however, pay me a handsome sum of money to 'look after the properties but HMRC would take a dim view of it .
When all is said and done .....my kids will be better off whatever tax has to be paid, but the properties are not necessarily for the kids but for me and the OH to have a decent living after farming !
 

Hfd Cattle

Member
Mixed Farmer
Location
Hereford
Another way of dealing with tax ...I think .... is put the properties into a Ltd company and make the kids directors of said company along with myself and OH ......I stand to be corrected on that ....and any other issue .
 

Highland Mule

Member
Livestock Farmer
You keep forgetting the £90k the house has sent back to his bank.

But anyway, with £500k in the bank where would you invest for better than 5% more or less guaranteed without capital growth?

£90k taxed, so £60k in hand.

Started with £90k, which needed £150k of earned to get. £60k of income after tax at a time when you probably don’t need it, and a £150k asset which will have CGT to pay, maintenance costs etc.

or put that £150k into a pension fund and see it become £230k of which I can get first ~£60k tax free and bleed rest out over low income years.

As for where it should go? I’m sorry but I don’t do advice. Suffice to say the idea of zero risk and some reward sounds a bit tricky.
 

Still Farming

Member
Mixed Farmer
Location
South Wales UK
how do i atatch an excel sheet?
I created an excel sheet comparing a pension and property.
It doe not consider capital growth of the property as @Highland Mule mentioned, for me there is no intention to dispose of the property.
I created it when i moved jobs, to see what i should do. For me of course, with a PAYE job, the tax releif on the pension payments are considerable and can easily shift the balance point.
However, taking a quick look at it this morning, i can see some ommissions in my calcs.

Its a sad fact I dont trust my pension company though...
They all provided fantastic projections 40 years ago.
 

fgc325j

Member
The way I understand it is that provided I live for 7 yrs after I have passed the ownership onto my children then the tax is exempt ........but things will change I think in the near future . I also understand that if I transferred the properties over then I would not under HMRC rules be able to take the income off them . My kids would be entitled to that . They could, however, pay me a handsome sum of money to 'look after the properties but HMRC would take a dim view of it .
When all is said and done .....my kids will be better off whatever tax has to be paid, but the properties are not necessarily for the kids but for me and the OH to have a decent living after farming !
That's my understanding - you must not receive any benefit during the 7 year period. Also, after the 7 year period you have a clean slate, and
can transfer another amount to your heirs, and again, once the 7 year period has passed, you can start again!! Providing you live past the 7 years
you can repeat ad nauseam.
 

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