Sipp and BTL
Author
Discussion

bmwmike

Original Poster:

8,755 posts

138 months

Sunday 31st January 2016
quotequote all
Hi

Thinking of buying a flat at around 125k ish sub stamp duty anyway, purely to rent. Or, somewhere as a holiday place for weekends in this country (UK).

Would be morgage for approx 90k.

Can that still go into SIPP or would I need to buy outright ?

Thanks

Mike

RichS

353 posts

244 months

Sunday 31st January 2016
quotequote all
Nice try, but no, you need to buy outright.

Also nb buy before 1 April to beat the 3% stamp duty; I don't think there's a nil-rate band for second homes. Worst of both worlds.

Also consider buying with your other half- means when you come to sell you get two sets of cgt allowances.

R

bmwmike

Original Poster:

8,755 posts

138 months

Sunday 31st January 2016
quotequote all
Bah! Suspected that might be the case.

Good point on CGT

Although I "thought" one could just gift to a spouse to get CGT allowance?


Have done that in past at advice of an accountant. Not with property though, another kind of equity.



RichS

353 posts

244 months

Sunday 31st January 2016
quotequote all
I think to get the cgt allowance you need to be legal owner when you sell. That means conveyance, which means lawyers which means complex. It also means complications if it's mortgaged. Best to buy together at the start.

What I do is buy together so legally we own jointly, then sever the beneficial joint tenancy via declaration of trust so my other half owns 95% of the beneficial interest. Because she's a lower rate taxpayer, any rent is tax efficient and I only pay higher rate on my 5% instead of 50%.

You also need to declare the declaration of trust to the revenue via Form (I think) 17.

Then when you're about to sell there's nothing to stop you redeclaring the beneficial ownership split so you can create enough gain in "your" half to be able to use your full £10,000 allowance. Simples.

R

bmwmike

Original Poster:

8,755 posts

138 months

Sunday 31st January 2016
quotequote all
Nice one.. thanks

So you have btl in a sipp? I can buy outright and wondering if it's worth doing


Or just buy on a cheap mortgage and do as you say to reduce tax.

I am a higher rate and wife is zero earnings so trying to find ways of using her unused tax allowance and reducing my liability! Unfortunately am PAYE.





shopper150

1,583 posts

224 months

Sunday 31st January 2016
quotequote all
A couple of points I'm unlear in that people have mentioned in this thread:
1) I didn't think you could buy residential property in a SIPP?
2) CGT would be irrelevant if a property is purchased within a SIPP

RichS

353 posts

244 months

Sunday 31st January 2016
quotequote all
bmwmike said:
Nice one.. thanks

So you have btl in a sipp? I can buy outright and wondering if it's worth doing


Or just buy on a cheap mortgage and do as you say to reduce tax.

I am a higher rate and wife is zero earnings so trying to find ways of using her unused tax allowance and reducing my liability! Unfortunately am PAYE.
No, not in a SIPP, I don't think you can do that.

Basically it depends on whether you trust your wife.... All our savings are in her name (eg Santander paying 3% gross interest on >£20,000), sheltering income tax on rent in her name instead of jointly as I mention above (so I don't get hit for 45%), putting £2,880 into a SIPP for her and getting another £700+ income tax relief from George Osborne on income she's not, er, earned, far less paid tax on.... Thanks v much!! All the more relevant now that they're doing a Google on BTL landlords and taxing income before mortgage interest instead of net profit. Btl landlords with no other income remain tax neutral up to the top of the basic rate of tax notwithstanding the recent changes to the system. Hence if the rent is in your other half's (no-other income) name you'll be no worse off.

That's before you get into the world of "paying" her to maintain/paint the btl, not sure if you can legitimately do that to set off against income in the property, I never risked it (bridge too far) but Eric Mc (who is an expert rather than a (slightly) gifted amateur like me) will I'm sure know.

R

bmwmike

Original Poster:

8,755 posts

138 months

Sunday 31st January 2016
quotequote all
Didn't know about the 2.8k into a sipp for her.. Nice one.. will look into that



RichS

353 posts

244 months

Sunday 31st January 2016
quotequote all
bmwmike said:
Didn't know about the 2.8k into a sipp for her.. Nice one.. will look into that
Yep. Get yourself(ves) over to Hargreaves Lansdown. Like someone said on another thread, What other asset class do you know where Gorgeous George gives you a 20% head start??

http://www.hl.co.uk/pensions/sipp/how-much-can-i-i...

R