House purchase - 10% deposit versus 20% and other factors

[garnet]

I mentioned this above with the warning about S455 taxation.

It is a good idea to leverage the funds you have direct access to. I have done this before; I actually borrowed a big lump from the Ltd, bought a house and then re-mortgaged to pay off the loan before the time limit for S455.

It's better if you can time it so that you can keep the loan for the maximum amount of time, ~20 months.

I didn't see your post.
Something interesting here:
When you took the mortgage to repay the loan, you could've technically waited for > 31 days and re-took the loan again (31 days to avoid bed and breakfasting) to repay the mortgage. And so on...

[garnet]

You could look at a director's loan. £10k is tax-free. £10k possibly for your spouse too. So that's £20k that you can make use of until you can repay it with paper-dividends to avoid S455. You can even loan a larger amount and then pay 3% interest (back to your own company). This is something I've done before.

Now, with the new divi tax, would this paper-divi option work to avoid s455?
I.e. if you take £10000 loan and you declare £10 000 divi on paper, but never take it out of LTD to cover your loan, do you have to pay 7.5% on £5000 divi?
If yes, isn't it better to just pay s455 and then claim it back?

[northernladuk]

Now, with the new divi tax, would this paper-divi option work to avoid s455?
I.e. if you take £10000 loan and you declare £10 000 divi on paper, but never take it out of LTD to cover your loan, do you have to pay 7.5% on £5000 divi?
If yes, isn't it better to just pay s455 and then claim it back?

You are kidding right. Just because you didn't take it out of the bank you don't pay tax on it? Honestly???

Are you sure you should be messing about with loans?

[Maslins]

If it was me, I'd take the extra cash out now for higher deposit, accepting the tax hit.

I also might look at longer term mortgages...not particularly because I anticipate interest rates rocketing any time soon, but because the arrangement fees (and hassle) aren't something I want to put up with often.

When we bought our first home ~8 years ago, I borrowed about £5k on credit cards to bump up our deposit as I reckoned the lower interest rate on mortgage long term made sense (was short term interest free balance transfer on c/c...a small one off charge but nothing else, and was confident could clear it before interest became payable). FWIW I took out a lifetime tracker (again mainly for minimising remortgage/hassle). This ended up working very well for us (rates were ~5% when we got mortgage, plummeted soon after), but I appreciate could have gone the other way.

I am not a financial adviser bla bla this is not formal advice yadda yadda.

[BrilloPad]

You are kidding right. Just because you didn't take it out of the bank you don't pay tax on it? Honestly???

Are you sure you should be messing about with loans?

What could go wrong?

http://forums.contractoruk.com/hmrc-...t-demands.html

[garnet]

You are kidding right. Just because you didn't take it out of the bank you don't pay tax on it? Honestly???

Are you sure you should be messing about with loans?

Assh--e, I am not kidding or anything. I am asking, and there is no need you to be smartass.

OP, provided you have enough money in the LTD the dir loan is the best way, provided you can pay s455 charge. You will claim that back when you repay the loan.

[WTFH]

Assh--e, I am not kidding or anything. I am asking, and there is no need you to be smartass.

OP, provided you have enough money in the LTD the dir loan is the best way, provided you can pay s455 charge. You will claim that back when you repay the loan.

Without resorting to childish name calling, may I ask you a question...


When you asked your accountant about this, did they agree with you?

[northernladuk]

Assh--e, I am not kidding or anything. I am asking, and there is no need you to be smartass.

OP, provided you have enough money in the LTD the dir loan is the best way, provided you can pay s455 charge. You will claim that back when you repay the loan.

I'm not being a smart ass. I'm genuinely shocked you think not taking it out of the bank makes a difference to the tax. It could be a thoughtless comment but if you genuinely think this you really need to understand your accounting better. It's like asking if you get interest on your personal bank account, if I don't withdraw it do I pay tax on it.... and you know the answer to that don't you?

And then after that you tell him a directors loan is the best way.........

[PerfectStorm]

I discussed the directors loan option with the accountant, and given that I have no other sources of income, it just seemed to be kicking the tax can down the road somewhat...

[northernladuk]

I discussed the directors loan option with the accountant, and given that I have no other sources of income, it just seemed to be kicking the tax can down the road somewhat...

Indeed and could also cost you if you've maxed it out and you could have used it for some jiggery pokery over the tax year end.