Contents
All change for pensions
A waste of time & money
Tax credit mess
Fuel up (shock)
Gimme shelter
Gulp! SIPPS
Paper or plastic?
Re: Mortgages
Bank the cheque
Subs beware
VAT's the limit
Dividend end?
The buck stops
Sack with care
Selling up
A matter of trust
We're watching
|
One of the new pension rules that is attracting a great deal of press comment is the new ability to invest in residential property. It appears that you could put your own house, or your holiday home, or a buy-to-let, or a furnished holiday let into a pension policy. In the past, if you wanted a tax-favoured plan, it would normally have to be invested in stocks and shares. Problem: property generally costs a lot of money. If you have five or six small pension plans, how can you buy a building with any of them? There are a number of features of the new rules that may help. First, you would have to establish a "Self-Invested Personal Pension" or SIPP. That would give you the control to choose what you wanted the money invested in. SIPPs are possible under existing rules, but they are likely to become much more common after April 2006. Next, you would have to get enough money into the SIPP to buy the property. In the tax year 2006/07, you will be able to contribute as much as the whole of your earnings for the year, from employment or self-employment, and get tax relief on all of it. Of course, you need something to live on; but if you sold other investments, or received a legacy, you might be able to put anything up to the overall maximum of £215,000 into a SIPP. The SIPP can borrow half as much again to fund the purchase. And, at the risk of putting too many eggs in the same basket, it is possible to transfer funds out of other existing pension plans into a SIPP. One major advantage of putting property into a SIPP are that capital gains are then tax-free. That means that it's probably not the best thing to do with your own house, because that's already exempt from CGT; but buy-to-lets and second homes may benefit. Instead of buying the property with income on which you've paid tax and paying more tax on gains, you can buy with income tax relief and pay no CGT. Many people are interested in these new plans. If you want more detail, we will be happy to provide it. |
© Bayar Hughes & Co., 2010.