BN66 - Time to fight back!!!

[elpinar]

so here i am, pen poised to write another cheque to send off for another CTD (as I cant get my hands on all of it instantly but am sending in what i can)

[smalldog]

sorry - i dont get your interest logic- it'll take you a damn long time to catch up the difference even on simple interest. If you owe them, say, 100k - you still pay 7,500 a year in interest - its just the 7.5k that isnt attracting interest - so the next year it would be 'just' another 7500 rather than 8162 so yes you are saving but you are still stumping up a tidy sum every year

dont disagree, but dont have a lot of choice really...if I dont have the money I dont have it. Cant get a CTD if I dont have the cash and Im not willing to try and sell my home on the basis that HMRC Might win

[DonkeyRhubarb]

sorry - i dont get your interest logic- it'll take you a damn long time to catch up the difference even on simple interest. If you owe them, say, 100k - you still pay 7,500 a year in interest - its just the 7.5k that isnt attracting interest - so the next year it would be 'just' another 7500 rather than 8162 so yes you are saving but you are still stumping up a tidy sum every year

It depends how long ago you were in the scheme. For example, in my case, my current tax/interest liability is split roughly 100/40. So, 5.5% net on 140 is equivalent to 7.7% on 100 which marginally beats HMRC's rate.

[BrilloPad]

1st post guys.

I've been with MP for 5 years.
What's the deal with the CTD thing?
How much to keep the wolves from the door?

welcome to the bn66 thread!

Take your partnership earnings over the 5 years - divide by 3. That is rough calc - for exact ask montp.

Dont do a CTD on interest - no point. Better off in high interest account.

BP

[ASB]

Donkey, you hit the nail on the head. I have property I would look for HMRC to either take a second charge or sell and as you say, now is not a good time. Im hedging my bets that say in 3 years things will have turned round and I have growth that matches or exceeds the 7.5% interest. Based on the fact that even in the current climate my flat in Islington has seen a 14% rise in the last 12 months doesnt make that a totally unrealistic prospect and actually gives me a profit of 6.5%

Just a thought but if you were to take a second mortgage to cover the liability and buy a CTD with that then the interest clock stops ticking. Of course this would only be cost effective if you *lose* and do ultimately have to pay up. Also if it's a rental property then you can (potentially) claim the interest on the advance against tax.

[smalldog]

Just a thought but if you were to take a second mortgage to cover the liability and buy a CTD with that then the interest clock stops ticking. Of course this would only be cost effective if you *lose* and do ultimately have to pay up. Also if it's a rental property then you can (potentially) claim the interest on the advance against tax.

It stops ticking on interest from HMRC Yes, but you have a second mortgage you are paying interest on and have to stump up the monthly repayment each month, where does that money come from? And then you are paying interest on a sum of money that could be a waste of time (and your money) if Montp win....Not sure there is a right or wrong yet, if Montp lose the JR then I would look to get a second mortgage I guess, but we arent there yet....think its obviously an individual choice, Im sitting on my hands until I can get a better idea which way its going.

[DonkeyRhubarb]

1st post guys.

I've been with MP for 5 years.
What's the deal with the CTD thing?
How much to keep the wolves from the door?

A Certificate of Tax Deposit (CTD) stops HMRC adding more interest to your liability. As you have been in the scheme a few years, you will already have accrued interest. You can't do anything about this but you can stop them adding more.

You can pay any amount you like into a CTD. Whatever you pay in will no longer attract interest. To stop further interest altogether, you need to pay in an amount equal to your potential tax liability.

If your current liability is £100k tax and £30k interest, then you need to deposit £100k. However, any amount you pay in will help to reduce further interest.

How to pay is described below. Basically you just send them a cheque with a covering letter, and they issue you with a certificate. You can withdraw the money at any time (eg. in an emergency). However, if you don't use it to pay a tax bill then it only earns a derisory rate of interest (1-2%).

http://www.hmrc.gov.uk/howtopay/cert_tax_deposit.htm

[elpinar]

It depends how long ago you were in the scheme. For example, in my case, my current tax/interest liability is split roughly 100/40. So, 5.5% net on 140 is equivalent to 7.7% on 100 which marginally beats HMRC's rate.

I 100% agree if you dont have the cash you have no option - but on the mortgagee offset vs CTD argument ....

if you had a 140 mortgage that was fully offset and your rate is 5.5 - you are saving a £641 mortgage every month and you are attracting 625 interest by the dear old hmrc (on the 100k)

if your liablity is as you say 100/40 - you would only consider paying 100 on a ctd as the 40 is not attracting interest - so if you did that you would then have

140 mortgage - offset by 40 - so you would pay 446 per month on the mortgage (100 k worth) - but hmrc would no longer be adding 625 interest to your bill - instead they would be adding zero . Explain to me how you think you are better off leaving your mortgage offset – unless you feel there is no chance at all you will have to hand over the cash – in which cash you are better off leaving it as it all is – but you betting about 2.5k a year on the outcome being good?

[ASB]

It stops ticking on interest from HMRC Yes, but you have a second mortgage you are paying interest on and have to stump up the monthly repayment each month, where does that money come from? And then you are paying interest on a sum of money that could be a waste of time (and your money) if Montp win....Not sure there is a right or wrong yet, if Montp lose the JR then I would look to get a second mortgage I guess, but we arent there yet....think its obviously an individual choice, Im sitting on my hands until I can get a better idea which way its going.

My thought (perhaps misguided) was that it would lower the overall total payable should you lose. i.e. you can (or maybe cannot) borrow the money interest only at less than 7.5% (especially if it's a rental property as tax relief may be available). [Basically if you lose you are going to be paying the interest so, if you can afford it - and find a cheaper rate - why not pay it now]

In the case that you win then you are definitely going to be worse off. You cash the CTD, pay the capital, but in this case you only get 1-2% of the amount as interest on the CTD so you're definitely going to be way behind (especially if it has dragged on for years).

[BrilloPad]

A Certificate of Tax Deposit (CTD) stops HMRC adding more interest to your liability. As you have been in the scheme a few years, you will already have accrued interest. You can't do anything about this but you can stop them adding more.

You can pay any amount you like into a CTD. Whatever you pay in will no longer attract interest. To stop further interest altogether, you need to pay in an amount equal to your potential tax liability.

If your current liability is £100k tax and £30k interest, then you need to deposit £100k. However, any amount you pay in will help to reduce further interest.

How to pay is described below. Basically you just send them a cheque with a covering letter, and they issue you with a certificate. You can withdraw the money at any time (eg. in an emergency). However, if you don't use it to pay a tax bill then it only earns a derisory rate of interest (1-2%).

http://www.hmrc.gov.uk/howtopay/cert_tax_deposit.htm

http://www.hmrc.gov.uk/howtopay/ctd-interest-rates.pdf

Did anyone ever work out why 2 interest rates? Also seems odd that certificates held 3-6 months (over 100k) get more interest than certs held 6-12 months

Will Mr Brannigan(hello ) explain why please?