New SIPP & property / land investment scheme
31 July 2005, 06:56 PM
#2
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Try www.SIPPS2006.com. Explains a little more. Remember though proper details not available from the treasury as yet. My idiots understanding is;
You can put up to the total value of your taxable annual income into the SIPP(per year) You will then be given a tax rebate on this!. You can then use this money to buy a residential property of which no more than half the value can be borrowed. The income from this property is then tax free and no CGT to pay.
I'm sure there is lots more small print though.
Sounds very promising, though remember if your total pension pot exceeds £1.5million it will be taxed at 55%!!!!!!!!!!!
Hope that helps a little
Deep
You can put up to the total value of your taxable annual income into the SIPP(per year) You will then be given a tax rebate on this!. You can then use this money to buy a residential property of which no more than half the value can be borrowed. The income from this property is then tax free and no CGT to pay.
I'm sure there is lots more small print though.
Sounds very promising, though remember if your total pension pot exceeds £1.5million it will be taxed at 55%!!!!!!!!!!!
Hope that helps a little
Deep
31 July 2005, 07:00 PM
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Originally Posted by Deep Singh
Try www.SIPPS2006.com. Explains a little more. Remember though proper details not available from the treasury as yet. My idiots understanding is;
You can put up to the total value of your taxable annual income into the SIPP(per year) You will then be given a tax rebate on this!. You can then use this money to buy a residential property of which no more than half the value can be borrowed. The income from this property is then tax free and no CGT to pay.
I'm sure there is lots more small print though.
Sounds very promising, though remember if your total pension pot exceeds £1.5million it will be taxed at 55%!!!!!!!!!!!
Hope that helps a little
Deep
You can put up to the total value of your taxable annual income into the SIPP(per year) You will then be given a tax rebate on this!. You can then use this money to buy a residential property of which no more than half the value can be borrowed. The income from this property is then tax free and no CGT to pay.
I'm sure there is lots more small print though.
Sounds very promising, though remember if your total pension pot exceeds £1.5million it will be taxed at 55%!!!!!!!!!!!
Hope that helps a little
Deep
so i can buy a house of my choice for 40% less or what
cheers
31 July 2005, 09:52 PM
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Not quite matey.
I'm far from an expert but here is my understanding.
Lets say you earn £10k a year. After tax £8k. You put the £8k into a SIPP and the govt adds to that the £2k of tax they took away so you are back to £10k.
You can then use this £10k as a 50% deposit(minimum) to buy a property. The income from the property will be tax free and when you sell the property there will be no 40% capital gains tax to pay.
As you can see, its more beneficial the more tax you pay. So if you pay 40% tax and your £10k becomes £6k after tax the govt gives you £4k back. Also if all the rental income was going to be taxed at 40%( because your job income has already pushed you into that bracket) then its more beneficial.
Downside is you cannot borrow more than 50% to buy hence you need a signifiacnt amount of cash.
Please note this is my own simple understanding of matters and there will be shed loads of small print to consider.
In London/SE this will suit those with £80k in the bank and earning over £80k a year. They can then use the approx £100k they have after rebate to put down as a 50% deposit on an average £200k buy to let.
Hope that makes some sort of sense.
PLEASE NOTE I AM NOT A PROFESSIONAL FINANCIAL TYPE, THIS IS JUST MY TAKE ON THINGS
Deep
I'm far from an expert but here is my understanding.
Lets say you earn £10k a year. After tax £8k. You put the £8k into a SIPP and the govt adds to that the £2k of tax they took away so you are back to £10k.
You can then use this £10k as a 50% deposit(minimum) to buy a property. The income from the property will be tax free and when you sell the property there will be no 40% capital gains tax to pay.
As you can see, its more beneficial the more tax you pay. So if you pay 40% tax and your £10k becomes £6k after tax the govt gives you £4k back. Also if all the rental income was going to be taxed at 40%( because your job income has already pushed you into that bracket) then its more beneficial.
Downside is you cannot borrow more than 50% to buy hence you need a signifiacnt amount of cash.
Please note this is my own simple understanding of matters and there will be shed loads of small print to consider.
In London/SE this will suit those with £80k in the bank and earning over £80k a year. They can then use the approx £100k they have after rebate to put down as a 50% deposit on an average £200k buy to let.
Hope that makes some sort of sense.
PLEASE NOTE I AM NOT A PROFESSIONAL FINANCIAL TYPE, THIS IS JUST MY TAKE ON THINGS
Deep
31 July 2005, 10:11 PM
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Originally Posted by Deep Singh
Not quite matey.
I'm far from an expert but here is my understanding.
Lets say you earn £10k a year. After tax £8k. You put the £8k into a SIPP and the govt adds to that the £2k of tax they took away so you are back to £10k.
You can then use this £10k as a 50% deposit(minimum) to buy a property. The income from the property will be tax free and when you sell the property there will be no 40% capital gains tax to pay.
As you can see, its more beneficial the more tax you pay. So if you pay 40% tax and your £10k becomes £6k after tax the govt gives you £4k back. Also if all the rental income was going to be taxed at 40%( because your job income has already pushed you into that bracket) then its more beneficial.
Downside is you cannot borrow more than 50% to buy hence you need a signifiacnt amount of cash.
Please note this is my own simple understanding of matters and there will be shed loads of small print to consider.
In London/SE this will suit those with £80k in the bank and earning over £80k a year. They can then use the approx £100k they have after rebate to put down as a 50% deposit on an average £200k buy to let.
Hope that makes some sort of sense.
PLEASE NOTE I AM NOT A PROFESSIONAL FINANCIAL TYPE, THIS IS JUST MY TAKE ON THINGS
Deep
I'm far from an expert but here is my understanding.
Lets say you earn £10k a year. After tax £8k. You put the £8k into a SIPP and the govt adds to that the £2k of tax they took away so you are back to £10k.
You can then use this £10k as a 50% deposit(minimum) to buy a property. The income from the property will be tax free and when you sell the property there will be no 40% capital gains tax to pay.
As you can see, its more beneficial the more tax you pay. So if you pay 40% tax and your £10k becomes £6k after tax the govt gives you £4k back. Also if all the rental income was going to be taxed at 40%( because your job income has already pushed you into that bracket) then its more beneficial.
Downside is you cannot borrow more than 50% to buy hence you need a signifiacnt amount of cash.
Please note this is my own simple understanding of matters and there will be shed loads of small print to consider.
In London/SE this will suit those with £80k in the bank and earning over £80k a year. They can then use the approx £100k they have after rebate to put down as a 50% deposit on an average £200k buy to let.
Hope that makes some sort of sense.
PLEASE NOTE I AM NOT A PROFESSIONAL FINANCIAL TYPE, THIS IS JUST MY TAKE ON THINGS
Deep
thanks for the explanation
31 July 2005, 10:29 PM
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Thks for the link, still a heap load of detail to be disclosed but indications are looking good, just need to understand how many stings are in the tail.
D
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01 August 2005, 10:36 AM
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Originally Posted by Newbie123
Just to add, If it's your main residence that you put into the pension fund then you'll have to pay rent to the pension fund for the use of your own house.
you would also be nuts as its not yor house anymore but the pension funds......fancy asking the trustees if you can do some DIY?
01 August 2005, 11:40 AM
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Originally Posted by Newbie123
Just to add, If it's your main residence that you put into the pension fund then you'll have to pay rent to the pension fund for the use of your own house.
01 August 2005, 12:15 PM
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whoever administers the SIPP fund for you (depends which company you use) will be the pension trustees. They will set tougher guidlines on what can happen to a property they hold in your SIPP than you would as a landlord (probably).
why you would do it with main residence when its already CGT free is beyond me!
why you would do it with main residence when its already CGT free is beyond me!
01 August 2005, 05:52 PM
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Thanks Tiggs. No plans to put main residence into SIPP, makes no sense!
Can I ask you a couple more?
1) Are there any recognised/reputable companies that administer SIPPs? What do they charge?
2) If I put a property into one in Apr2006 that is worth £100k but in ten years time is worth over £1.5m, does that mean it will be taxed at 55% or is there some kind of indexation?
Many thanks
Deep
Can I ask you a couple more?
1) Are there any recognised/reputable companies that administer SIPPs? What do they charge?
2) If I put a property into one in Apr2006 that is worth £100k but in ten years time is worth over £1.5m, does that mean it will be taxed at 55% or is there some kind of indexation?
Many thanks
Deep
01 August 2005, 06:17 PM
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One more question.
I've read somewhere that all mortgage payments must be met from the fund. Does that mean that one needs the next 15 years mortgage payments already in the fund aswell as the 50% deposit??
Deep
I've read somewhere that all mortgage payments must be met from the fund. Does that mean that one needs the next 15 years mortgage payments already in the fund aswell as the 50% deposit??
Deep
02 August 2005, 07:56 PM
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Originally Posted by JackClark
When you say property, can this be land? I'm close to buying a field and this would be a bonus.
02 August 2005, 08:03 PM
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Originally Posted by JackClark
When you say property, can this be land? I'm close to buying a field and this would be a bonus.
DS....sorry about the delay...will answer tommorow.
JC....when the asset goes in the SIPP its owned by the pension...NOT you...even if you could put the field ina SIPP (no idea if you can) not sure you would want to under those circumstances.
02 August 2005, 11:19 PM
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JC - (field sounds v familiar 
) All info I've seen mentions non depreciating assets, which clearly land is. (unless you're getting an oil field or a mine ) Although all the examples make no mention of land being an option.
If land can be put into a SIPP, I was thinking about imposing a covenant on it before transferring to the SIPP to pass to me a % of any future value increase, resulting from a change of use (agric to resid and therefore big ££££'s). This would allow me to dictate the recipient of the gain, rather than locking it into the SIPP.
Food for thought !
D
) All info I've seen mentions non depreciating assets, which clearly land is. (unless you're getting an oil field or a mine ) Although all the examples make no mention of land being an option.If land can be put into a SIPP, I was thinking about imposing a covenant on it before transferring to the SIPP to pass to me a % of any future value increase, resulting from a change of use (agric to resid and therefore big ££££'s). This would allow me to dictate the recipient of the gain, rather than locking it into the SIPP.
Food for thought !
D
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