• Property Tax – Cup half empty or half full

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    Changes to the tax system for Buy to Let property has left a rather sour taste in a lot of investors mouths, this is because when the tax changes come into full force they could see their profits from rent drop by half.

    I see these people as being rather cup half empty. This does not have to be all doom and gloom and instead should be igniting the fire to say I will not let this happen and I will not loose half of my income, rather than moaning they should find a solution.

    Well I hope these solutions may help.

    One solution is to put the properties into a limited company as you will pay Corporation tax where rates are lower, this however could have other associated costs so it would be wise to seek advice.

    Another solution is to move the properties into a loved one or partners name if they are a lower band tax payer again I would seek advice as there may be associated costs or implications.

    And my final solution where my cup is half full is to just double your portfolio. It spreads your risk further so is safer, it will give you double the capital growth over time, and it is fun finding new investments and growing a portfolio.

    The Nationwide Building Society published estimated figures of how a typical landlord’s profits might be hit. Someone with a £150,000 buy-to-let mortgage on a property worth £200,000, with a monthly rent of £800, would currently have a net profit of around £2,160 a year. Under the new system, the net profit would plunge to £960.

    So buy a second investment and even if it is only achieving the same profits as your first you are now at £1,920 net profit only a £240 deficit and why stop there why not add another, again I would still seek some advice as there could be associated costs or implications. So look at how many buy to lets you have and then just double them not only can it be fun it could work out more profitable than where you are at now.

    With interest rates for mortgages at an all time low and rental at an all time high it would be crazy not to capitalise on this as it will not get any better. In fact I feel the government have done this in an attempt to plug the loophole that has made property investment so profitable, I mean where else in the world can you invest and use a banks money to make a profit.

    Yes you will have to have the money to do this but if you are already a property investor you should have already made a great deal of profit and if not look at other avenues, like they say where there’s a will there’s a way.

    To learn more about this approach, give us a call on 01342 840050.

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