The concerns of property owners
Having exchanged long enough ago on my property for the elation of buying my first home to have passed and be replaced with the impending dread of having financially committed myself to what will likely be the single biggest purchase of my life, I have (somewhat understandably I think) begun to take a keen interest in how the property market will perform over the coming months and years.
Unfortunately, trying to predict what is likely to happen to the property market at the current time is far from easy. The main reason for this being the government’s crusade against, or perhaps persecution of, buy to let landlords. It is perhaps impossible to see where the recent changes in legislation will leave the property market in years to come. As is well documented, the restriction on interest relief for buy to let landlords could in due course lead to the farcical situation where landlords making a ‘real’ loss on a property portfolio would still end up facing a tax bill. If this is the case during periods of record low interest rates, imagine what could happen if interest rates were to rise?
The above has still not dampened my enthusiasm to start my own property portfolio, this may seem like I am getting somewhat carried away given that it has taken me this long to buy my first property, however, I have always been a little prone to getting carried away! However, when I do start my portfolio, I think I will choose to hold it through a company as there is no restriction on interest relief and it allows for the rental profits to be taxed at the corporate rate applicable at the time, which is less than my personal marginal rate. This is not necessarily the best choice for everyone, but is likely to be for a large number of people.
If you are now thinking that you wished you were able to transfer your property portfolio into a company, but feel as though you are prohibited as it has latent gains and you don’t want to trigger Capital Gains Tax and stamp duty costs, then all is not necessarily lost as it is likely that you may be able to take advantage of some fairly generous exemptions and reliefs which will allow you to do so without triggering either of these taxes.
Finally, in my solicitor’s covering letter with the documents they sent for approval, they asked me if I had a Will. Now I do not, although I have considered it – despite being relatively young, however the rules of intestacy accurately reflect my wishes at this point of my life. My assets also do not exceed the current Nil Rate Band and therefore I need not give any consideration to tax planning. However, I hope that both of these factors will change in due course, and when they do I was amazed to think about what a good opportunity incorporating a portfolio afforded to future Inheritance tax planning.
It could be argued, validly, that I spend far too long thinking about things that are yet to pass. However, I suppose my retort would be; better to think about the future when you can still affect it than regretting not being proactive in the past when you could have been.Talk to Barnes Roffe today