The Budget - Weeks on ...

[loosemarbles]

Now the initial shock of the budget has passed, what three things are you going to do/not do which you planned, as a direct consequence of the budget?

1. For me, checking our will wording around the shares in the family business, as well as planning some very pre-emptive IHT mitigation.
2. Checking we are maximising benefit around salary sacrifice for our staff, to mitigate the NIC hit.
3. Setting up our Irish company to take advantage of CT savings (high levels of legitimate business).

[BAMoFo]

My plan is to:

(1) Gift my daughter my properties as they become available (just done so with one last week).
(2) Reduce the amount I pay my missus via the Ltd Company from £7800 per year to £5000 per year.
(3) Ensure that ISA and pension allowances are fully utilised each year. If there are inadequate funds in the financial year I will prioritise ISAs over pension.

I am also going to try and increase the rents on my properties because (i) they are all roughly half their market value or below and (ii) experience has taught me that the tenants don't appreciate the fact that their rent is cheap.

Edited by BAMoFo on Tuesday 10th December 06:19

[loosemarbles]

I should have added about maxing ISA and Pension. Having taken over my business a couple of years ago, this is the first year I will be making pension contributions, so a few years to make up for too.

[Armitage.Shanks]

BAMoFo said:

My plan is to:

(1) Gift my daughter my properties as they become available (just done so with one last week).

I thought that was a good idea and my plan, except you pay CGT on the increase from when you bought it when passing it on as a gift. I've chosen to retain them so when I die all my assets pass to my wife IHT exempt and then she can gift any properties without being liable to CGT on the increase if she moves it on straight away. Seven year rule obviously applies.

[BAMoFo]

Armitage.Shanks said:

BAMoFo said:

My plan is to:

(1) Gift my daughter my properties as they become available (just done so with one last week).

I thought that was a good idea and my plan, except you pay CGT on the increase from when you bought it when passing it on as a gift. I've chosen to retain them so when I die all my assets pass to my wife IHT exempt and then she can gift any properties without being liable to CGT on the increase if she moves it on straight away. Seven year rule obviously applies.

In my case it will work out cheaper to pay the CGT now rather than my daughter paying IHT in the future. Also, she will have the benefit of the assets while she is much younger and won't be subject to the high probability of ever increasing tax rates in the future. The icing on the cake is that it will reduce the time that I have to suffer the idiocy of private rental legislation and tenants.

Edited by BAMoFo on Tuesday 10th December 10:23

[leef44]

Armitage.Shanks said:

BAMoFo said:

My plan is to:

(1) Gift my daughter my properties as they become available (just done so with one last week).

I thought that was a good idea and my plan, except you pay CGT on the increase from when you bought it when passing it on as a gift. I've chosen to retain them so when I die all my assets pass to my wife IHT exempt and then she can gift any properties without being liable to CGT on the increase if she moves it on straight away. Seven year rule obviously applies.

I've just started thinking about this and my thought process was along these lines. We've only got our main residence which is about £400k so should be covered within IHT threshold.

However, with GIAs (general investment accounts) with equity funds we could just withdraw funds within the £3k CGT allowance and leave the rest. Am I correct in thinking that the remaining asset passes on at the transfer value so avoids CGT? Our assets are lower than the IHT threshold in total for a couple to pass onto our only child.

Just for reference, we are both retired so can't fill up SIPP to more than £2880 each and came into funds from downsizing recently so didn't use up ISA allowance in earlier years. The plan back then was to fill up ISAs each year when CGT allowance was £12k. Now with the allowance at £3k this is more difficult to fill up the ISAs.

[kiethton]

BAMoFo said:

My plan is to:

(1) Gift my daughter my properties as they become available (just done so with one last week).
(2) Reduce the amount I pay my missus via the Ltd Company from £7800 per year to £5000 per year.
(3) Ensure that ISA and pension allowances are fully utilised each year. If there are inadequate funds in the financial year I will prioritise ISAs over pension.

I am also going to try and increase the rents on my properties because (i) they are all roughly half their market value or below and (ii) experience has taught me that the tenants don't appreciate the fact that their rent is cheap.

Edited by BAMoFo on Tuesday 10th December 06:19

Can always shareholder loan the company to cover the payments, can then be repaid in subsequent years if you expect to have some excess

[anonymous-user]

BAMoFo said:

they are all roughly half their market value or below and (ii) experience has taught me that the tenants don't appreciate the fact that their rent is cheap.

They tend to stay forever (mine have been there seven years so far) but moan as soon as you mention putting up the rent by £50.

Mine are in a three bedroom detached house and would be lucky to get a two bedroom terrace for the same money. I have been putting it up £50 a year, but after Covid I am still hundreds behind market value.

But then part of me thinks they give me little hassle and always pay the rent, plus I would need to put a new kitchen in for new tenants as it is 40 years old now.

For me, I was seriously thinking about selling my BTL after all the media fearmongering about CGT, glad I kept it now.

I have started piling even more into my pension just incase they ever take away the 40% tax benefit.

[Happy Jim]

1. Drawdown on my SIPP up to the max before higher rate tax kicks in (was planning on spending cash first).
2. Deed of variation on my parents will to skip me and pass directly to kidults (plan was only a partial pass through).
3. Spend more (finding this hard after a lifetime of accumulation “headspace”).

[Phooey]

BAMoFo said:

My plan is to:

If there are inadequate funds in the financial year I will prioritise ISAs over pension.

Interested in your thinking here? From my limited understanding i think pensions are still the better option even with the IHT inclusion.. unless of course you are a 20% tax payer and/or you have already hit the max tax-free amount of £268,275 then the gap between ISA and SIPP narrows substantially. I think.

[BAMoFo]

Phooey said:

BAMoFo said:

My plan is to:

If there are inadequate funds in the financial year I will prioritise ISAs over pension.

Interested in your thinking here? From my limited understanding i think pensions are still the better option even with the IHT inclusion.. unless of course you are a 20% tax payer and/or you have already hit the max tax-free amount of £268,275 then the gap between ISA and SIPP narrows substantially. I think.

My missus and I are 20% tax payers, but only because we ensure that we remain so by balancing incomes from PAYE jobs, private property rental income and Ltd Company income. This enables us to make much larger pension contributions than would be expected for a 20% tax payer. The ISAs are fully funded by drawing down from cash reserves.

[BAMoFo]

kiethton said:

Can always shareholder loan the company to cover the payments, can then be repaid in subsequent years if you expect to have some excess

Hi, any chance you could elaborate further because I don't understand what you mean. I have a couple of properties that are owned privately but the majority are owned by my Limited Company. They are all owned outright but the company does owe my a chunk of money because I used personal to buy some of the properties.

[DeuceDeuce]

BAMoFo said:

My plan is to:

(2) Reduce the amount I pay my missus via the Ltd Company from £7800 per year to £5000 per year.

Edited by BAMoFo on Tuesday 10th December 06:19

Why this? Probably a decent reason but if it’s to do with NI then make sure you’re claiming any employment allowance your company is entitled to. May mean a higher salary will not attract NI.

[BAMoFo]

DeuceDeuce said:

BAMoFo said:

My plan is to:

(2) Reduce the amount I pay my missus via the Ltd Company from £7800 per year to £5000 per year.

Edited by BAMoFo on Tuesday 10th December 06:19

Why this? Probably a decent reason but if it’s to do with NI then make sure you’re claiming any employment allowance your company is entitled to. May mean a higher salary will not attract NI.

I know about the employment allowance but am not sure that I can be bothered with the paperwork. She can use the rest of her tax allowance up using money from private rental income.

[ooid]

Armitage.Shanks said:

I thought that was a good idea and my plan, except you pay CGT on the increase from when you bought it when passing it on as a gift.

I believe if you gift your 'main home', there is NO CGT.

[ooid]

loosemarbles said:

Now the initial shock of the budget has passed, what three things are you going to do/not do which you planned, as a direct consequence of the budget?

1-) Salary Sacrifice.
2-) Bonus Waiver.
3-) Pension Portfolio re-balance, making sure that no more than 5% assets/holdings in U.K.

[mikeiow]

loosemarbles said:

Now the initial shock of the budget has passed, what three things are you going to do/not do which you planned, as a direct consequence of the budget?

1. For me, checking our will wording around the shares in the family business, as well as planning some very pre-emptive IHT mitigation.
2. Checking we are maximising benefit around salary sacrifice for our staff, to mitigate the NIC hit.
3. Setting up our Irish company to take advantage of CT savings (high levels of legitimate business).

What kind of pre-emptive IHT mitigation?
Still 2 years off those changes.

To be fair, we have decided to try to gently share out more ongoing wealth rather than hold DC pot to last….but otherwise no major changes for us (early retired folk…)

We have also decided we will likely change our much loved EV for a new/newer one that would be hit by the “expensive car supplement” next April….a work in progress.

[loosemarbles]

mikeiow said:

What kind of pre-emptive IHT mitigation?
Still 2 years off those changes.

It is more making sure that we are planning ahead and not unnecessarily tying us into any particular route, especially as rules are liable to change. We hadn't developed a plan for gifting any class of shares for example to the next generation (they would be the sixth) but it is prudent to at consider some timing on it.

We don't want our kids to be in the position where they have to buy the business of us, as I had to, but neither do we want Succession-esque challenges, as I had over many years, with the ensuing impact on relationships and wellbeing.

[mikeiow]

Ahh, complexities of family business.
I imagine many farmers are considering similar points.
Good luck!

[Rufus Stone]

loosemarbles said:

It is more making sure that we are planning ahead and not unnecessarily tying us into any particular route, especially as rules are liable to change. We hadn't developed a plan for gifting any class of shares for example to the next generation (they would be the sixth) but it is prudent to at consider some timing on it.

We don't want our kids to be in the position where they have to buy the business of us, as I had to, but neither do we want Succession-esque challenges, as I had over many years, with the ensuing impact on relationships and wellbeing.

Gift hold over relief appears the next best thing to business relief if it is removed. Doesn't solve the problem as such, but moves it a generation on when the tax situation may have improved (or worsened of course!)