jamandco Posted March 8, 2008 Report Share Posted March 8, 2008 Hi All For those of you who have read Andy Shaws book, you'll recall that he says that, as long as you dont sell your properties , once you've bought them, you can draw equity out of them TAX FREE by remortgaging, with the proviso that if you never sell them, you'll never have tax to pay, and so you dont face the tax man for any liability? What I'd like to understand is this........ what would happen if I used this as a strategy? and if when I got to the end of the mortgage term after 25 years on an interest only mortgage,....... wouldn't the taxman want his slice? after all, the loan has come to an end because I would be 70 years old by then, and perhaps unable to refinance the portfolio again because of my age I'm quite miffed now as to how this is achievable because wouldn't I be forced to sell my properties to settle the mortgages and the tax bill too?? Look forward to hearing the answer to this one folks regards Michael Link to comment Share on other sites More sharing options...
odecar Posted March 10, 2008 Report Share Posted March 10, 2008 Nope You are only allowed set off the value of loans against a property to the value of that property once you let it for the first time. Therefore any interest payable on remortgaging over this is not allowable against tax. Link to comment Share on other sites More sharing options...
plym77 Posted March 10, 2008 Report Share Posted March 10, 2008 Hi Jamandco I have not read the book you have mentioned, however I am a chartered tax adviser and hope that my comments will assist. In theory he is right in that he is talking about Capital Gains Tax which is only payable when you sell a property, therefore if you don't sell or gift the property, then you dont pay Capital Gains Tax. However do remember that any equity will end up in your future Estate for IHT purposes and therefore if you are worth in excess of the Nil Rate Band (currently £300k) then IHT would be payable on the balance of your Estate @ 40% without forward IHT planning. * Therefore whilst in a sense he is right that no tax would be paid during your lifetime, it may be that IHT may be payable after your death meaning your beneficiaries will receive less inheritance without planning against it during your life. There are various ways to minimise and mitigate against CGT and IHT with forward planning. Just on the other note, Odecar is correct - for clarification you can set off mortgage interest against your rental property applicable to capital equal to the value of the property when first let - search my other forum posts on mortgage interest for examples of how this works in practical terms. Hope this helps Sherena Glanton CTA * NB. the figures are a bit more complicated if you are married due to the proposed change in IHT legislation regarding Nil Rate Bands being transferrable - obviously depending what is to happen with your Estate, who is receiving it etc. Link to comment Share on other sites More sharing options...
plym77 Posted March 10, 2008 Report Share Posted March 10, 2008 Hi Jamandco I have not read the book you have mentioned, however I am a chartered tax adviser and hope that my comments will assist. In theory he is right in that he is talking about Capital Gains Tax which is only payable when you sell a property, therefore if you don't sell or gift the property, then you dont pay Capital Gains Tax. However do remember that any equity will end up in your future Estate for IHT purposes and therefore if you are worth in excess of the Nil Rate Band (currently £300k) then IHT would be payable on the balance of your Estate @ 40% without forward IHT planning. * Therefore whilst in a sense he is right that no tax would be paid during your lifetime, it may be that IHT may be payable after your death if you have equity in the property meaning your beneficiaries will receive less inheritance without planning against it during your life. Just on the other note, Odecar is correct - for clarification you can set off mortgage interest against your rental property applicable to capital equal to the value of the property when first let - search my other forum posts on mortgage interest for examples of how this works in practical terms. Therefore in thoery whilst you can keep remortgaging and remortgaging as the value of the house goes up there would be a point at which (if not reached already) some of the interest will not attract tax relief. There are various ways to minimise and mitigate against Income Tax, CGT and IHT with forward planning and structuring. Hope this helps Sherena * NB. the figures are a bit more complicated if you are married due to the proposed change in IHT legislation regarding Nil Rate Bands being transferrable - obviously depending what is to happen with your Estate, who is receiving it etc. Link to comment Share on other sites More sharing options...
jamandco Posted March 10, 2008 Author Report Share Posted March 10, 2008 Thanks to you guys for this....things are much clearer now ! much appreciated Michael Link to comment Share on other sites More sharing options...
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