Optimise Accountants | How will he Budget Announcement affect you?

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Property Tax Specialists Helping high rate tax payers invest in property

Transcript of Optimise Accountants | How will he Budget Announcement affect you?

Page 1: Optimise Accountants | How will he Budget Announcement affect you?

Property Tax Specialists

Helping high rate tax payers invest in property

Page 2: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Louise and Simon have been property investors since 2006 and not paid any tax on our property portfolio.

Page 3: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Free guide if you give me your business card or your name, mobile and email and a piece of paper…

Page 4: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

We only focus on property investors like you since 2003… 600+ investors across the UK

Page 5: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Accountants talk

• Tax allowable expenses• National Insurance Contributions• Capital Gains Tax• Capital Allowances• Income Tax• Corporation Tax• Company structures

• Limited Companies• Partnerships• LLPs• Sole Traders

• Stamp Duty• Council Tax• Inheritance tax• International tax• Deed of trust• VAT on new build• VAT on refurbishment projects• More interesting facts• More data• Boredom• Get me out of here• I cant take anymore• Please leave me alone• I am going to get a phone and call the police• I mean it I have had enough• If you can see this then you have good eye sight• Have you had enough yet?

Page 6: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Page 7: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

o Employment taxo Savings income taxo Insurance premium taxo Self employment taxo National Insuranceo Road Taxo Council Taxo Fuel, alcohol, cigarettes Dutyo VAT

Tax time…all the time…(life, death, taxes)

Page 8: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Return on Investment (ROI)o Do you factor tax in your ROI calculation?

Page 9: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Jane Medical professional – High rate tax payer (2014-15)

o £100,000 to buy a new flat

o £25,000 deposit o £3,000 profit per year

o 12% ROI = £3,000 divided by £25,000

Page 10: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Jane Medical professional – High rate tax payer (2014-15)

o £100,000 to buy a new flat

o £35,000 (£25,000 deposit + £10,000 tax)

o £1,800 profit per year (after tax)

o 5.1% ROI = £1,800 divided by £35,000

Page 11: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Property profits£2,100 rent (6 ASTs X £350)

(£210) less voids(£350) less Utility bills(£425) less mortgage(£300) less maintenance

£815 profit per month£9,780 annual profits

Page 12: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Who is affected by the budget announcemento High rate tax payers

o People with furnished properties

o People that own limited companies

o People with large asset portfolios (for example properties, shares, businesses)

o People buying second homes, BTLs

o People selling properties

Page 13: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Who is affected by the budget announcement

Withholding CGT

Rent a room Allowance

Mortgage Interest

Relief Cap

Corporate Tax

Increase SDLT

Wear & Tear Allowance

Page 14: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Who is affected by the budget announcement

Page 15: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

o 3% additional stamp duty costs (additional tax)

o Anything over £40,000 (3% on total amount)

o Direct from .Gov website

“"A owns both a main residence and a second home. She sells her main residence and purchases a new one. Although she has two properties at the end of the day of the transaction, she has replaced her main residence so the higher rates will not apply” (sell within 36 months)

Who is affected by the budget announcement

Page 16: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

SDLT – Resi & commercial scaled on tier basisValues Residential

£0-£125K 0%

£125K - £250K 2%£250K - £925K 5%£925K - £1.5m 10%

£1.5m+ 12%

Plus surcharge> £40K 3%

Values Commercial£0-£150K 0%

£150K - £250K 2%£250+ 5%

Page 17: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Identify chattels to reduce SDLT and tax

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Helping high rate tax payers invest in property

Identify chattels to reduce SDLT and taxo carpets (fitted or otherwise)o curtains o Blindso Free-standing furnitureo kitchen white goodso Electric and gas fires (provided that they

can be removed by disconnection from the power supply without causing damage to the property)light shades and fittings (unless recessed).

Page 19: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Who is affected by the budget announcement

Withholding CGT

Rent a room Allowance

Mortgage Interest

Relief Cap

Corporate Tax

Increase SDLT

Wear & Tear Allowance

Page 20: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Property Profits£9,780 annual profits

(£2,520) wear & tear allowance

£7,260 taxable profit

(£2,904) tax @ 40% (12% of income)

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Helping high rate tax payers invest in property

Property Profits£9,780 annual profits

(£2,520) wear & tear allowance

£9,780 taxable profit

(£3,912) tax @ 40% (16% of income)

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Helping high rate tax payers invest in property

Property Profits£9,780 annual profits

£5,100 add mortgage interest

£14,880 Paper taxable profit

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Helping high rate tax payers invest in property

Property Profits£14,880 Paper taxable profit

£5,952 tax @ 40%

(£1,020) 20% tax relief on mortgage

£4,932 tax to pay 20% of income

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Helping high rate tax payers invest in property

£25,200 rental income

Before budget announcement

£2,904 tax (11% of rental income)£6,876 cash profit (27% of renal)

After budget announcement

£4,932 tax (20% of rental income)£4,848 cash profit (19% of rent)

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Helping high rate tax payers invest in property

What does RE stand for?

REPLACE

REPAIR

RENEW

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Helping high rate tax payers invest in property

What does RE stand for?

Certain improvements are tax allowable:

http://www.hmrc.gov.uk/manuals/bimmanual/BIM46904.htm

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Helping high rate tax payers invest in property

What does RE stand for?

Not allowable

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10% wear & tear on furnitureo Must be fully furnished

o Beds o Furnitureo Curtainso White goodso Sofa, chairs, tableso Cabinets and cupboardsRemoved fro

m April 2016

Helping high rate tax payers invest in property

Page 29: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

REPLACE

REPAIR

RENEW

RE – What does RE stand for?

Page 30: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Budget solutionso Buy new properties in a limited company

o Transfer existing properties to a limited company

o Pay off mortgage (mortgage interest relief 20%)

o Invest in commercial properties

o Invest in your pension to increase personal allowances

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Helping high rate tax payers invest in property

Now 2017 2020+20% 19% 18%/17%

o Corporation tax rates

People with limited companies

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Helping high rate tax payers invest in property

£10,800 annual profits

Scenario 1: Without Limited Company

£4,320 Tax at 40%

Scenario 2: Limited Company

£1,836 tax at 17%

Which do you prefer?

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Helping high rate tax payers invest in property

Typically:

o Mortgage rates are higher than BTL

o Arrangement fees are higher

o Deposit are higher (30%+)

o Mortgage applications take longer

Considerations when buying in a limited company

Page 34: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

o Stamp Duty Land & Tax

o Capital Gains Tax

o Getting a mortgage

Consideration point: Transfer properties with small CGT

Transferring existing properties into a Limited Co.

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Helping high rate tax payers invest in property

o Ramsay v HMRC (2013)

o Transfer all properties to a LTD = no CGT

o Must be working in property

Incorporation relief

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Helping high rate tax payers invest in property

Questions…

… but first how to engage with us ?

Page 37: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

High rate tax payers only

o Name

o Number

o Email address

Page 38: Optimise Accountants | How will he Budget Announcement affect you?

Helping high rate tax payers invest in property

Tax Consultation for less than £100

http://www.optimiseaccountants.co.uk/financetaxconsultation/

Code “Talk33” to get 33% off your consultation