IFA, Accountant or go it alone?
Discussion
Hi all after a bit of advice on how best to proceed, let me set the scene first and apologies in advance for the length of this.
Okay so our current house with worth about £215k (had the estate agents round yesterday). What we really want to do is keep this house as a BTL and move to a new house, new house is approx £375k.
so my logic is remortgage current house on to BTL at 75% LTV (£160k), this would pay off the remaining £100K we owe and give me a £60k deposit for the new house. BTL interest would be approx £400, rental income would be £750-800 minus fees, i'm thinking full management at 10% as i don't want the hassle of dealing with tenants.
i then just get a new mortgage for £315k over 25years for the new house. This is where the complications start, on my basic salary(higher rate tax) looking at a few lender websites i can only get a mortgage for about £260k, however i also have up to 10% bonus, a company car - is it possible to get these factored in? i also have a side business that myself and the wife have 70/30 split on a shares which provides a few extra grand a year in dividends (call it £10k between us). My wife has just started a self-employed business (beauty therapy) so at the moment isn't actually earning anything, so makes sense to put the BTL in her name to shield us from the income tax, plus that would effectively bolster her earnings, again is this something a lender would take into account. The other issue with this is can i have the BTL mortgage in my name but the house and income in her name? as i don't think she'd get a BTL without a decent income?
so basically is this something a IFA could help me with, or due to the tax considerations do i need an accountant? or have i get enough of a gasp to do this myself? i'd be leaning towards coventry building society for the BTL and first direct for an offset mortgage (currently got a one account but an not happy with how crap its become).
Okay so our current house with worth about £215k (had the estate agents round yesterday). What we really want to do is keep this house as a BTL and move to a new house, new house is approx £375k.
so my logic is remortgage current house on to BTL at 75% LTV (£160k), this would pay off the remaining £100K we owe and give me a £60k deposit for the new house. BTL interest would be approx £400, rental income would be £750-800 minus fees, i'm thinking full management at 10% as i don't want the hassle of dealing with tenants.
i then just get a new mortgage for £315k over 25years for the new house. This is where the complications start, on my basic salary(higher rate tax) looking at a few lender websites i can only get a mortgage for about £260k, however i also have up to 10% bonus, a company car - is it possible to get these factored in? i also have a side business that myself and the wife have 70/30 split on a shares which provides a few extra grand a year in dividends (call it £10k between us). My wife has just started a self-employed business (beauty therapy) so at the moment isn't actually earning anything, so makes sense to put the BTL in her name to shield us from the income tax, plus that would effectively bolster her earnings, again is this something a lender would take into account. The other issue with this is can i have the BTL mortgage in my name but the house and income in her name? as i don't think she'd get a BTL without a decent income?
so basically is this something a IFA could help me with, or due to the tax considerations do i need an accountant? or have i get enough of a gasp to do this myself? i'd be leaning towards coventry building society for the BTL and first direct for an offset mortgage (currently got a one account but an not happy with how crap its become).
To be tax allowable doesn't the loan on the BTL have to be "for the purpose of buying the BTL"? If you already own the property you clearly don't need a loan to buy it so if my first sentence is correct you wouldn't be able to claim the tax deduction.
Don't forget you would have to pay the new higher rate of stamp duty (+3%) on purchase of your new house as a "second property". Your BTL will also be subject to the old (higher) rates of Capital Gains Tax.
TBH I'll be surprised if you can turn that plan into a profitable enterprise. Why not just buy a house you want to live in and live in it tax free, investing your remaining money in other tax free things like ISAs and pensions?
HMRC says "For Income Tax, interest payable on loans used to buy land or property which is used in the rental business, or on loans to fund repairs, improvements or alterations, is deductible in computing the profits or losses of the rental business in the same way as other expenses.
"....the interest on a loan or overdraft may not be allowable, or only part may be allowable, where the taxpayer, for example, uses the borrowing:
•to buy non-rental business investments (which may be shown in the balance sheet as assets),
•to buy private assets or assets for their family,
•for the provision of private funds to be taken out from the rental business.
"Deciding what interest, if any, can be deducted may be difficult, particularly where the taxpayer’s account with the business is overdrawn. That is, where the taxpayer has drawn out more money than the profits of the rental business. The loan may have, for example, partly financed the rental business and partly met private living expenses. Interest on a borrowing that is used to fund private living expenses or other non-business expenditure isn’t allowable."
Don't forget you would have to pay the new higher rate of stamp duty (+3%) on purchase of your new house as a "second property". Your BTL will also be subject to the old (higher) rates of Capital Gains Tax.
TBH I'll be surprised if you can turn that plan into a profitable enterprise. Why not just buy a house you want to live in and live in it tax free, investing your remaining money in other tax free things like ISAs and pensions?
HMRC says "For Income Tax, interest payable on loans used to buy land or property which is used in the rental business, or on loans to fund repairs, improvements or alterations, is deductible in computing the profits or losses of the rental business in the same way as other expenses.
"....the interest on a loan or overdraft may not be allowable, or only part may be allowable, where the taxpayer, for example, uses the borrowing:
•to buy non-rental business investments (which may be shown in the balance sheet as assets),
•to buy private assets or assets for their family,
•for the provision of private funds to be taken out from the rental business.
"Deciding what interest, if any, can be deducted may be difficult, particularly where the taxpayer’s account with the business is overdrawn. That is, where the taxpayer has drawn out more money than the profits of the rental business. The loan may have, for example, partly financed the rental business and partly met private living expenses. Interest on a borrowing that is used to fund private living expenses or other non-business expenditure isn’t allowable."
Nano2nd said:
Hi all after a bit of advice on how best to proceed, let me set the scene first and apologies in advance for the length of this.
Okay so our current house with worth about £215k (had the estate agents round yesterday). What we really want to do is keep this house as a BTL and move to a new house, new house is approx £375k.
so my logic is remortgage current house on to BTL at 75% LTV (£160k), this would pay off the remaining £100K we owe and give me a £60k deposit for the new house. BTL interest would be approx £400, rental income would be £750-800 minus fees, i'm thinking full management at 10% as i don't want the hassle of dealing with tenants.
i then just get a new mortgage for £315k over 25years for the new house. This is where the complications start, on my basic salary(higher rate tax) looking at a few lender websites i can only get a mortgage for about £260k, however i also have up to 10% bonus, a company car - is it possible to get these factored in? i also have a side business that myself and the wife have 70/30 split on a shares which provides a few extra grand a year in dividends (call it £10k between us). My wife has just started a self-employed business (beauty therapy) so at the moment isn't actually earning anything, so makes sense to put the BTL in her name to shield us from the income tax, plus that would effectively bolster her earnings, again is this something a lender would take into account. The other issue with this is can i have the BTL mortgage in my name but the house and income in her name? as i don't think she'd get a BTL without a decent income?
so basically is this something a IFA could help me with, or due to the tax considerations do i need an accountant? or have i get enough of a gasp to do this myself? i'd be leaning towards coventry building society for the BTL and first direct for an offset mortgage (currently got a one account but an not happy with how crap its become).
Coventry BS have a minimum income of £25k, so you will need to be on the mortgage and the deeds.Okay so our current house with worth about £215k (had the estate agents round yesterday). What we really want to do is keep this house as a BTL and move to a new house, new house is approx £375k.
so my logic is remortgage current house on to BTL at 75% LTV (£160k), this would pay off the remaining £100K we owe and give me a £60k deposit for the new house. BTL interest would be approx £400, rental income would be £750-800 minus fees, i'm thinking full management at 10% as i don't want the hassle of dealing with tenants.
i then just get a new mortgage for £315k over 25years for the new house. This is where the complications start, on my basic salary(higher rate tax) looking at a few lender websites i can only get a mortgage for about £260k, however i also have up to 10% bonus, a company car - is it possible to get these factored in? i also have a side business that myself and the wife have 70/30 split on a shares which provides a few extra grand a year in dividends (call it £10k between us). My wife has just started a self-employed business (beauty therapy) so at the moment isn't actually earning anything, so makes sense to put the BTL in her name to shield us from the income tax, plus that would effectively bolster her earnings, again is this something a lender would take into account. The other issue with this is can i have the BTL mortgage in my name but the house and income in her name? as i don't think she'd get a BTL without a decent income?
so basically is this something a IFA could help me with, or due to the tax considerations do i need an accountant? or have i get enough of a gasp to do this myself? i'd be leaning towards coventry building society for the BTL and first direct for an offset mortgage (currently got a one account but an not happy with how crap its become).
10% bonus can be used if you can evidence 2 years history of being paid it, if it's an annual bonus.
Car allowance can be used.
Side business can be used, if you have at least two years HMRC figures.
Hope that helps
Ozzie Osmond said:
To be tax allowable doesn't the loan on the BTL have to be "for the purpose of buying the BTL"? If you already own the property you clearly don't need a loan to buy it so if my first sentence is correct you wouldn't be able to claim the tax deduction.
Don't forget you would have to pay the new higher rate of stamp duty (+3%) on purchase of your new house as a "second property". Your BTL will also be subject to the old (higher) rates of Capital Gains Tax.
TBH I'll be surprised if you can turn that plan into a profitable enterprise. Why not just buy a house you want to live in and live in it tax free, investing your remaining money in other tax free things like ISAs and pensions?
HMRC says "For Income Tax, interest payable on loans used to buy land or property which is used in the rental business, or on loans to fund repairs, improvements or alterations, is deductible in computing the profits or losses of the rental business in the same way as other expenses.
"....the interest on a loan or overdraft may not be allowable, or only part may be allowable, where the taxpayer, for example, uses the borrowing:
•to buy non-rental business investments (which may be shown in the balance sheet as assets),
•to buy private assets or assets for their family,
•for the provision of private funds to be taken out from the rental business.
"Deciding what interest, if any, can be deducted may be difficult, particularly where the taxpayer’s account with the business is overdrawn. That is, where the taxpayer has drawn out more money than the profits of the rental business. The loan may have, for example, partly financed the rental business and partly met private living expenses. Interest on a borrowing that is used to fund private living expenses or other non-business expenditure isn’t allowable."
hmm.. i hadn't realised this would attract the new stamp duty rate, thats £20k on a £375000 house - ouch! So if our current house which is in my name gets gifted to my wife and then is solely in her name, if i then buy a new house (as a non-house owner) to i get the standard stamp duty rate of £8750? the issue then is how to we unlock the £160k we need out of my "wifes" house with her not having any income....Don't forget you would have to pay the new higher rate of stamp duty (+3%) on purchase of your new house as a "second property". Your BTL will also be subject to the old (higher) rates of Capital Gains Tax.
TBH I'll be surprised if you can turn that plan into a profitable enterprise. Why not just buy a house you want to live in and live in it tax free, investing your remaining money in other tax free things like ISAs and pensions?
HMRC says "For Income Tax, interest payable on loans used to buy land or property which is used in the rental business, or on loans to fund repairs, improvements or alterations, is deductible in computing the profits or losses of the rental business in the same way as other expenses.
"....the interest on a loan or overdraft may not be allowable, or only part may be allowable, where the taxpayer, for example, uses the borrowing:
•to buy non-rental business investments (which may be shown in the balance sheet as assets),
•to buy private assets or assets for their family,
•for the provision of private funds to be taken out from the rental business.
"Deciding what interest, if any, can be deducted may be difficult, particularly where the taxpayer’s account with the business is overdrawn. That is, where the taxpayer has drawn out more money than the profits of the rental business. The loan may have, for example, partly financed the rental business and partly met private living expenses. Interest on a borrowing that is used to fund private living expenses or other non-business expenditure isn’t allowable."
the reason we want to keep it is two fold, i would like over the next 20 years to pay down the capital part of the BTL and have 100% ownership, which will provide us with a reasonable income in retirement... the second is purely emotional, i bought the house when i was 20, my then girlfriend (now wife) moved in shortly after and we've grown up there (as well as our young daughter) we both like the idea of a safety net, i.e. if we didn't like were we moved too, or we fell on hard times we could move back and be debt free( if i disposed of an asset - the 430) subject to tenants moving out, so i guess worst case 12 months later
Sarnie said:
Coventry BS have a minimum income of £25k, so you will need to be on the mortgage and the deeds.
10% bonus can be used if you can evidence 2 years history of being paid it, if it's an annual bonus.
Car allowance can be used.
Side business can be used, if you have at least two years HMRC figures.
Hope that helps
thanks, unfortunately i don't have sufficient evidence on the bonus and its a company car so theres no allowance as such, i'm intending on opting out but that won't be till august, but its good to know that the £5k would count10% bonus can be used if you can evidence 2 years history of being paid it, if it's an annual bonus.
Car allowance can be used.
Side business can be used, if you have at least two years HMRC figures.
Hope that helps
From 6 April 2017, the ability to offset interest and other finance charges against rental profits will be severely curtailed.
Essentially, you won't get as much tax relief on these costs compared to what you used to.
There have been a number of threads on this topic in the financial forums on PH. Have a search.
Essentially, you won't get as much tax relief on these costs compared to what you used to.
There have been a number of threads on this topic in the financial forums on PH. Have a search.
Nano2nd said:
Ozzie, i'm not sure i understand about the interest not being allowable, isn't the interest on the BLT mortgage part of remortgaging to buy the the BLT? sorry if thats sounds dumb!
This is why people have accountants... Pay them to worry about it and sort it out - but find one who can look forwards rather than just add numbers up retrospectively. When you're dealing with large sums of money the things an accountant can do should quickly cover his costs.Eric Mc said:
From 6 April 2017, the ability to offset interest and other finance charges against rental profits will be severely curtailed.
Essentially, you won't get as much tax relief on these costs compared to what you used to.
There have been a number of threads on this topic in the financial forums on PH. Have a search.
Hi Eric, am i right in saying though if the BTL goes into the wifes name as she doesn't have an income it becomes largely irrelevant a the rental income wouldn't take her upto even the lowest tax bracket? I am aware of the changes though, another kick in the teeth by our chancellor.Essentially, you won't get as much tax relief on these costs compared to what you used to.
There have been a number of threads on this topic in the financial forums on PH. Have a search.
Simpo Two said:
This is why people have accountants... Pay them to worry about it and sort it out - but find one who can look forwards rather than just add numbers up retrospectively. When you're dealing with large sums of money the things an accountant can do should quickly cover his costs.
that kinda goes back to my original question, is an accountant the right person to talk to about all this or and IFA? i do have an accountant for my Ltd co however he pretty much falls into the "just add numbers up retrospectively" camp 
every-time i ask him something i feel like a get 10 reasons why it won't work rather than any pro-active this is what you should be doing, basically i pay him £400 a year to prepare and submit my Ltd accounts, not sure if i should be expecting more for that kind of money?Jockman said:
So you would end up with debt of £475k and you only have eligibility for £260k plus potential rental income?
Do you feel you may be stretching yourself too much?
well spotted, yes in my current situation your probably right, bear in mind that 260 is on my base only. I do have a plan, i'm currently working on a couple of new opportunities that have packages around £30k-40K a year more that my current job (basically i'm being ripped off). I'm also not factoring my my wife's business taking off, which could realistically pull £30k a year. I also don't want to sell either my 430 @ £100K or my RS2000 @ £35K if i don't have too, however shifting these does make things easier.Do you feel you may be stretching yourself too much?
Nano2nd said:
that kinda goes back to my original question, is an accountant the right person to talk to about all this or and IFA? i do have an accountant for my Ltd co however he pretty much falls into the "just add numbers up retrospectively" camp every-time i ask him something i feel like a get 10 reasons why it won't work rather than any pro-active this is what you should be doing, basically i pay him £400 a year to prepare and submit my Ltd accounts, not sure if i should be expecting more for that kind of money?
I'd say you are getting what £400 p/a buys - basic accounts & submission. every-time i ask him something i feel like a get 10 reasons why it won't work rather than any pro-active this is what you should be doing, basically i pay him £400 a year to prepare and submit my Ltd accounts, not sure if i should be expecting more for that kind of money?You sound like you need a Tax adviser.
I'm an IFA, & your questions are not an area i'd personally enter into.
To me the numbers dont stack up in terms of the BTL being profitable (check out the new tax changes), or the debt being serviceable / eligible on your primary residence.
From your numbers if you own a f430 plus some other toys and earn circa 50-60k, and wish to invest in buy to let, then you may need to release some capital from the toys to help with deposits.
I would also say the only time these things really add up is when you fund them at the most favorable rates, for that you will need 35 - 40% deposits on both.
From your numbers if you own a f430 plus some other toys and earn circa 50-60k, and wish to invest in buy to let, then you may need to release some capital from the toys to help with deposits.
I would also say the only time these things really add up is when you fund them at the most favorable rates, for that you will need 35 - 40% deposits on both.
Nano2nd said:
Hi Eric, am i right in saying though if the BTL goes into the wifes name as she doesn't have an income it becomes largely irrelevant a the rental income wouldn't take her upto even the lowest tax bracket? I am aware of the changes though, another kick in the teeth by our chancellor.
If you are a basic rate taxpayer and the rental income is not enough to put you into higher rates, then the changes to tax relief on rental interest and financial charges will have no overall effect.Are you happy to have the property entirely into another person's hand just to save some income tax? Think of what might happen if and when the property is sold - especially when it comes to Capital Gains Tax.
gibbon said:
From your numbers if you own a f430 plus some other toys and earn circa 50-60k
Purchasing and running a F430 on that salary must take some awesome man math skills! OP I salute you! :-)As for your what your asking, accountant is your best bet for advice. Why not sell exciting house, use what you need to for the new purchase. Then with whats left put in a deposit on a buy to let. Upside is you'll probably find a house that yields higher if your buying for the purpose of buy to let, downside is the cost of selling and buying will go up.
Edited by AnimalMother on Wednesday 23 March 13:56
Nano2nd said:
that kinda goes back to my original question, is an accountant the right person to talk to about all this or and IFA?
I find they defer to each other a lot dependent on their comfort/knowledge on a subject and regs. This often makes me reach for the Google in order to try and reach some sort of timely conclusion. Way below ideal!Eric Mc said:
Are you happy to have the property entirely into another person's hand just to save some income tax? Think of what might happen if and when the property is sold - especially when it comes to Capital Gains Tax.
Hi Eric, do you mean on a trust basis? i though as we were married if could be transfered back into both our names to take advantage of both our CGT allowances?AnimalMother said:
Purchasing and running a F430 on that salary must take some awesome man math skills! OP I salute you! :-)
not so much, i'm pretty good with money acutely its been dirt cheap to run, just 2 annual services in 2 years, insurance is cheap, i don't use it enough to worry about fuel consumption lol plus its go'ing up in value every day at the minuteGassing Station | Finance | Top of Page | What's New | My Stuff