Originally posted by Martin at NixonWilliams
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Reply to: Max "Tax free" div come April 6th
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Previously on "Max "Tax free" div come April 6th"
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Originally posted by ContrataxLtd View PostThe LTV when purchased is irrelevant, you need to be looking at the capital account of the owner when first made available to rent.
Originally posted by ContrataxLtd View PostIn essence you can remortgage up to the market value when first rented and still receive a deduction for interest payments.
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Originally posted by ContrataxLtd View PostNo problem Scrag!
Tax planning for rebels in Nicaragua, now that's a gap in the market for sure! Actually, I think I'll stick to contractor accounting.
Martin
Contratax LtdLast edited by northernladuk; 26 February 2014, 11:00.
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Originally posted by ContrataxLtd View PostYou might want to take a read of the following BIM45700 - Specific deductions - interest: Withdrawal of capital from a business and in particular example 2.
By your logic, you are implying that if you purchase a rental property outright for cash i.e. LTV of 0% you can never take out a mortgage on it and get a deduction for interest payments which is clearly wrong.
The LTV when purchased is irrelevant, you need to be looking at the capital account of the owner when first made available to rent. In essence you can remortgage up to the market value when first rented and still receive a deduction for interest payments.
Hope this clarifies things for you.
Martin
Contratax Ltd
restructuring finances on the residential property can prove beneficial to gain tax relief and a lower rate compared with btl mortgage.
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Originally posted by Scrag Meister View PostThanks Martin and Martin.
Will have a think about the suggestions.
ContraTax? Mainly tax planning for rebels in Nicaragua?
Tax planning for rebels in Nicaragua, now that's a gap in the market for sure! Actually, I think I'll stick to contractor accounting.
Martin
Contratax Ltd
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Thanks Martin and Martin.
Will have a think about the suggestions.
ContraTax? Mainly tax planning for rebels in Nicaragua?
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Originally posted by Martin at NixonWilliams View PostMartin makes a good point, this is common tax planning for rental property owners and is definitely worthwhile if the savings are significant enough to warrant the hassle.
The above point is very important. If you had equity in the property to begin with, you cannot remortgage the property with a higher LTV than you started with.
By your logic, you are implying that if you purchase a rental property outright for cash i.e. LTV of 0% you can never take out a mortgage on it and get a deduction for interest payments which is clearly wrong.
The LTV when purchased is irrelevant, you need to be looking at the capital account of the owner when first made available to rent. In essence you can remortgage up to the market value when first rented and still receive a deduction for interest payments.
Hope this clarifies things for you.
Martin
Contratax Ltd
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Originally posted by ContrataxLtd View Postequity in the rental when purchased etc.
The above point is very important. If you had equity in the property to begin with, generally you cannot remortgage the property beyond the capital introduced.Last edited by Martin at NixonWilliams; 26 February 2014, 15:36.
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Originally posted by Scrag Meister View PostInterest is only about £75 of the 125, the rest is landlords insurance and services cover for boiler, plumbing, electrics etc..
Planning for it to be mortgage free by Oct 2015.
Thanks for your comments, very helpful.
Have you considered maximising the mortgage on the rental property to increase interest payments and thus reduce profit and therefore tax liability?
This might be a worth considering if you have a personal mortgage on your main residence that you could reduce by the equity released from the rental. Obviously there are a lot of other factors that need to be considered, effective rates of interest on each property, equity in the rental when purchased etc. but it could be a good bit of tax planning if your circumstances fit.
If this applies drop your accountant a line to discuss, or feel free to drop me a PM if you wish.
Hope this helps
Martin
Contratax Ltd
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Originally posted by Craig at Nixon Williams View PostWhether it is an interest-only mortgage or the interest element of a repayment mortgage, the deduction will be the same amount.
If he only has £125 of expenses the chances are that the property is mortgage-free.
Hope this helps.
Craig
Planning for it to be mortgage free by Oct 2015.
Thanks for your comments, very helpful.
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Originally posted by Craig at Nixon Williams View PostWhether it is an interest-only mortgage or the interest element of a repayment mortgage, the deduction will be the same amount.
There was a thread recently about taking out an increased mortgage on a rental property that may have some interesting bits of information in it too.
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Originally posted by Clare@InTouch View PostYou could look into an interest only mortgage on the property, that would fully allowable against the income. Otherwise it's only the interest element.
If he only has £125 of expenses the chances are that the property is mortgage-free.
Hope this helps.
Craig
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Originally posted by Scrag Meister View PostMany thanks.
That is good news and bad news
Good : I thought it was gonna be 40% on 600, but its not.
Bad : On income up to the 40% limit I actually pay more personal tax than if I didn't let the house out and took a max div.
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Originally posted by Scrag Meister View PostBad : On income up to the 40% limit I actually pay more personal tax than if I didn't let the house out and took a max div.
Sounds like two good's to me
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Originally posted by Martin at NixonWilliams View PostCorrect, as your personal allowance is used up against your salary.
Correct again
That is good news and bad news
Good : I thought it was gonna be 40% on 600, but its not.
Bad : On income up to the 40% limit I actually pay more personal tax than if I didn't let the house out and took a max div.
Leave a comment:
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