Reply to: Pension or buy-to-let?

[tim123]

If you are not an MP it would be better not to try this at home. Crimes for which we would face repayment, interest, penalties, and jail;

Not at all.

Subject to the "available for your use rule" you can "flip" (nominate) your PPR (Principle Private Residence) to any property that you own, at any time.

There is no need for you to live in it for the majority of that time, or even a substantial period.

What the MPs did was completely legal, using rules available to everyone in the land. ISTM that what they did was no bigger a deal than a Labour MP sending his kids to a private school (I.e it was politically embarrassing, but no more).

tim

[expat]

Ah, yup if it's not a "primary" residence yes it will attract Capital Gains tax, but as proven by so many MP's recently that's easy enough to avoid by a little Flipping.

If you are not an MP it would be better not to try this at home. Crimes for which we would face repayment, interest, penalties, and jail; they think are all fixed by promising not to do it in future.

[b0redom]

I can't see them stealing property. Then again....

What? Like they did with Northern Rock + Bradford & Bingley shares?

[TykeMerc]

Not if it's rented out. You can only filp between houses which are genuinely "available for your use"

tim

That's easy enough if one of your family are resident there for a short period while you "flip".

[tim123]

Ah, yup if it's not a "primary" residence yes it will attract Capital Gains tax, but as proven by so many MP's recently that's easy enough to avoid by a little Flipping.

Not if it's rented out. You can only filp between houses which are genuinely "available for your use"

tim

[d000hg]

Son is , hopefully, off to University next year and we are thinking of buying a btl to give him somewhere to live and rent out space to other students.

Well that changes everything... after 3-4 years even if you lose a bit, you've helped your son which is a big plus on the non-monetary side of things. And, it might end up earning you a nice amount.

[TykeMerc]

the capital gain is still taxed (which is what I was referring to)

tim

Ah, yup if it's not a "primary" residence yes it will attract Capital Gains tax, but as proven by so many MP's recently that's easy enough to avoid by a little Flipping.

[tim123]

Money invested into an offset mortgage savings account doesn't get paid interest, but it cuts the amount of the mortgage capital that attracts interest. In effect you're getting the mortgage interest rate paid on your savings, but not as income so there's no income tax due.

Tax efficient, tidy and a reasonable return if the house prices aren't falling.

the capital gain is still taxed (which is what I was referring to)

tim

[TykeMerc]

How is it tax free?

tim

Money invested into an offset mortgage savings account doesn't get paid interest, but it cuts the amount of the mortgage capital that attracts interest. In effect you're getting the mortgage interest rate paid on your savings, but not as income so there's no income tax due.

Tax efficient, tidy and a reasonable return if the house prices aren't falling.

[Cyberman]

How is it tax free?

tim

... because your savings offset the mortgage, so you are not paid interest and therefore there is no savings tax to pay. If you kept your savings separately then you would have to pay savings tax at your highest marginal rate.

[tim123]

Son is , hopefully, off to University next year and we are thinking of buying a btl to give him somewhere to live and rent out space to other students. Otherwise I am making the mst of the permie pension atm and chucking cash into an offeset mortgage account to get it paid off. Much better effective guarenteed return if you still have a mortgage than ISA's atm. And effectively tax free as well.

How is it tax free?

tim

[ASB]

Independent analysis has confirmed that property has outperformed shares over the past 15 years. You only have to look at pensions to see the devastating effects of the high tax, high management costs and risks have on returns.

Property at least will always follow inflation, and the returns are normally tax-free. Then you also have a property to live in at zero rent throughout retirement if you wish not to sell. You cannot live in your shares.

Your argument seems to have changed from "over the long term you'll do better with capital values of property than equities" to "well, never mind you can always live in it". This is, of course a valid point, it also demonstrates the point I made about property being traditionally an income generating asset (and living in it "rent free" is effectively the same thing in that it reduces the need for income).

[Cyberman]

I'm not convinced. If you actually look at property prices over the last 25 years and factor in inflation you might find it is nowhere near as great as you think. Sure, there have been some spectular preiods in that - both upwards and downwards. However, if your strategy is long term buy and hold I doubt it has done much better than equities (of course I can cherry pick various periods in both to "prove" the point either way).

Personally I tend to view property as an income investment; purpose to produce an income which generally maintains pace with general inflation.

Independent analysis has confirmed that property has outperformed shares over the past 15 years. You only have to look at pensions to see the devastating effects of the high tax, high management costs and risks have on returns.

Property at least will always follow inflation, and the returns are normally tax-free. Then you also have a property to live in at zero rent throughout retirement if you wish not to sell. You cannot live in your shares.

[ASB]

Also, remember what they did to Railtrack for political motives when they stole the company.

I wasn't much bothered TBH. But only because I had the luck - I mean foresight - to sell nearly all my holding fairly close to the peak.

Any way the liquidators sucessfully returned rather more than the then share price (which of course shows as fake the "insolvent" argument). However, given the ongoing changes since I do rather imagine Railtrack would probably be pretty much worthless now (bar it's land bank).

[ASB]

The upside is mainly on the equity gains expected over 25 years or so. As far as rents are concerned you can get rental insurance for a two bed at around 100 quid a year. Rents would also tend to follow inflation. I have a friend that has two BTLs instead of a pension and is doing very well for himself, as he keeps telling me.

I'm not convinced. If you actually look at property prices over the last 25 years and factor in inflation you might find it is nowhere near as great as you think. Sure, there have been some spectular preiods in that - both upwards and downwards. However, if your strategy is long term buy and hold I doubt it has done much better than equities (of course I can cherry pick various periods in both to "prove" the point either way).

Personally I tend to view property as an income investment; purpose to produce an income which generally maintains pace with general inflation.