We’re now making it our mission to make sure you have the right cover in place to protect your buy to let properties. We look at your current circumstances from a property investor’s viewpoint and in almost every case we have found ways to improve your cover.
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What does this really mean?
* Well if you died today do you have things in place to cover your portfolio?
* Would your partner struggle to remortgage your properties should the lenders call the loan in?
* Are you paying money every month from a standing order and not even know what it covers you for?
In most cases the answer is really simple - consider putting your life cover in trust.
1. Quicker payment of claims. If someone dies and their plan is not in a trust, their representatives will have to obtain Grant of Representation before they can deal with the plan. This can take several months.
2. The plan proceeds may be free of inheritance tax.
3. At the moment, inheritance tax is payable at 40% on any part of an estate valued over £325,000 (2009/2010). But you can use a trust to gift some (or all) of the benefits on the plan to other people. The gifted benefits would no longer be part of your client’s estate if they die, which means these benefits would not be subject to inheritance tax.
If you do have life cover remember this - every month a payment is coming out of your bank account - make sure it counts!
Tip of the week 2: Reduce your tax bills by setting up a property management company
Back by popular demand Stephen Fay ACA, our specialist property accountant, has come up with another fantastic tax tip. Please do read these carefully because they really will save you money (also please feel free to contact Stephen who is on hand to answer any more detailed questions – his email is stephenfay@fyldetaxaccountants.co.uk)
Historically low interest rates means that many property investors are now making substantial rental profits – meaning potentially substantial income tax bills. One option to reduce income tax liabilities is to set up your own ‘property management company’ – without needing to sell your properties to the company.
This can mean paying tax at 21% rather than 40% - and enable a non-working spouse or family member to draw a £6k salary from the company and use up their personal allowance. Typically, tax bills can be legitimately cut by around 30%. As you would expect, there are some ‘rules’ to be followed:
*The arrangement has to be a genuine commercial arrangement – this means that the company really must be providing the investor with management services (managing tenants, arranging insurance, managing mortgage payments etc). However the company may ‘outsource’ tenant-management to a Letting Agent.
*A normal commercial charge should be made for services provided.
*Ideally, to avoid any hint that this is purely a tax-saving set-up, the company would provide management services, at the same rate, to other investors as well as the owner – even just a couple of properties (tenant-management can be outsourced to a Letting Agent).
For investors with substantial rental profits, operating a property management company can produce substantial income tax savings. And, the costs of running the company are also fully tax-deductible.
Again wise words from Stephen.
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