Cashing a pension and buying a house to rent out.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 4:40 pm

I am considering doing whats in the title. A question or 2. In April the tax threshold raises to 50 grand for the 40 percent tax bracket so I can take some of my pot up to that 50k without paying 40 percent. Does anyone know roughly what tax I will pay if just under the 50k in that tax year.
Also any tips or help regarding renting much appreciated. Looking at one in my street. ty.

Bosscat · Post by **Bosscat** » Wed Jan 02, 2019 4:49 pm

Anything you take over 25% of your pension pot is taxable....
The 1st 25% of your pot is tax free.

https://www.google.com/url?sa=t&source= ... pSVnELlRPd" onclick="window.open(this.href);return false;

Barry_Chuckle · Post by **Barry_Chuckle** » Wed Jan 02, 2019 4:49 pm

I assume you are aged 55 or over....... 25% is tax free, anything over that is added to any other earned income during the tax year, with tax being payable at the relevant tax bracket.

Hope this helps.

gawthorpe_view · Post by **gawthorpe_view** » Wed Jan 02, 2019 4:51 pm

My understanding is that the first 25% of your pension pot can be taken tax free.
The rest is taxed at 40%.
Having worked in social housing for 15 years my advice is don't sink your hard earned pension into a house for rent, one bad tennant will wreck your investment.

clarethomer · Post by **clarethomer** » Wed Jan 02, 2019 4:51 pm

claretnproud wrote:I am considering doing whats in the title. A question or 2. In April the tax threshold raises to 50 grand for the 40 percent tax bracket so I can take some of my pot up to that 50k without paying 40 percent. Does anyone know roughly what tax I will pay if just under the 50k in that tax year.
Also any tips or help regarding renting much appreciated. Looking at one in my street. ty.

Get advice.

Consider spreading over 2 tax years to lessen the tax bill.

Also be aware of a heavy tax hit on withdrawal as HMRC could view the withdrawal as a monthly one. There is a form you can use to claim back but could catch you out if you need the cash to complete.

Buy to let is also another set of considerations re tax etc...

I would seek advice of a financial adviser and an accountant.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 5:00 pm

gawthorpe_view wrote:My understanding is that the first 25% of your pension pot can be taken tax free.
The rest is taxed at 40%.
Having worked in social housing for 15 years my advice is don't sink your hard earned pension into a house for rent, one bad tennant will wreck your investment.

My understanding is that you only pay 40 percent if you are over the threshold of 40 grand currently but 50 grand from April this year. Was just wondering what percentage you pay if your total earnings/pension withdrawal is just under the 50 k if I was to withdraw in April when the 50k threshold is in force.

COBBLE · Post by **COBBLE** » Wed Jan 02, 2019 5:01 pm

Good advice from Clarethomer especially the risk of all your withdrawal being treated as a month only.

South West Claret. · Post by **South West Claret.** » Wed Jan 02, 2019 5:02 pm

Another consideration if you don't know is the increased Stamp Duty on a second house purchase, it's now 3%!

Reckoner · Post by **Reckoner** » Wed Jan 02, 2019 5:06 pm

You pay nothing up to your personal allowance (which I think is going up to 12.5k). Then 20% on anything between that and 50k, then 40% on anything above that. But that is subject to the fact you can take 25% of your pot tax free as mentioned.

Reckoner · Post by **Reckoner** » Wed Jan 02, 2019 5:12 pm

If you get any income elsewhere you need to include that though - the threshold for rates are based on your annual income not isolated to one source.

ClaretTony · Post by **ClaretTony** » Wed Jan 02, 2019 5:18 pm

I took some money from a matured pension during last year but the sensible option for me was to take just the 25% tax free allowance. I got advice before doing anything and I’d advise that if you are not sure.

Bosscat · Post by **Bosscat** » Wed Jan 02, 2019 5:22 pm

claretnproud wrote:I am considering doing whats in the title. A question or 2. In April the tax threshold raises to 50 grand for the 40 percent tax bracket so I can take some of my pot up to that 50k without paying 40 percent. Does anyone know roughly what tax I will pay if just under the 50k in that tax year.
Also any tips or help regarding renting much appreciated. Looking at one in my street. ty.

Get some wise advice from experts.... I use Howarths (Accrington based but have offices in Settle and Bentham).... John McGregor is very good (even if he does follow Rovers

) not the cheapest but I get great advice and have saved me a damned sight more than the fees... and thats all you can ask from a professional.

The sums you are talking about are best done through a financial advisor who can guide you through all the tax implications.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 5:32 pm

thanks all. keep it coming. any advice on the rental situation also welcome.

Bosscat · Post by **Bosscat** » Wed Jan 02, 2019 5:49 pm

claretnproud wrote:thanks all. keep it coming. any advice on the rental situation also welcome.

If you are renting a good tenant is worth looking after.

When I was still Locksmithing I used to work for a number of landlords and they all had stories of nightmare tenants and the mess they left in (usually owing months and months of rent)

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 5:51 pm

I think some people are not fully understanding some of the question.

If you take a pension as a lump sum you can take 25% tax free, the rest needs to be as a draw down or SIPP or used to buy an annuity. From the question it sounds as if you have done that already and you are asked no about removing money from your lump sum that’s taxable.
You can take approx 13k without tax, then you pay the normal rate (think it’s 20%) on anything above that up to around 50k before paying 40% rate.

I have two friends who have bought houses for rent, one had three but gave up due to the work involved and that was before the new tax rules which make it much less lucrative.
The other currently owns 4 houses and is actively searching for an alternative.
Basically the tax rules changed to to tax you on turnover, before it was on profit.
It’s massively complex now but you could break even on a year and still pay lots of tax whereas before you would have paid no tax.
My advice, talk to someone who is currently renting before taking the plunge.

Also if Corbyn gets in, he has pledged to get rid of private landlords, another reason he is looking to change his direction of investment.

barba · Post by **barba** » Wed Jan 02, 2019 6:09 pm

I would give this a serious thought before cashing in your pensions to purchase a second house. The tax treatment of pensions is by far and away the most beneficial whereas with second properties there is the stamp duty levy (+3%), rent is treated as taxable income, capital gains tax on sale and a reduction in allowable expense deductions all in the attempt to discourage people from entering the buy to let market.

This is all before you account for maintenance, safety checks, insurance, property management and rental void periods.

You will also be restricted on the amount you can pay back into pensions if you take anything over the tax free element.

I think it boils down to what you are trying to achieve and how a second property will meet this over and above a pension.

charlyt · Post by **charlyt** » Wed Jan 02, 2019 6:32 pm

Don't forget the 3% levy you will pay on a buy to rent property!

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 6:33 pm

thank you all. Especially the last 3 posts. That does put a different slant on things and does put me off the rental route. much appreciated.

J50 · Post by **J50** » Wed Jan 02, 2019 6:41 pm

Lowbankclaret wrote:
Also if Corbyn gets in, he has pledged to get rid of private landlords, another reason he is looking to change his direction of investment.

Must have missed JC saying that?!!

Tories are doing their best to make the PRS less attractive but getting rid of private landlords altogether could be tricky!

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 6:53 pm

J50 wrote:Must have missed JC saying that?!!

Tories are doing their best to make the PRS less attractive but getting rid of private landlords altogether could be tricky!

Just repeating the concerns of my friend, who clearly thinks this is an issue.

If you own 4 buy to let’s, maybe you did miss it!

UnderSeige · Post by **UnderSeige** » Wed Jan 02, 2019 6:54 pm

One alternative that is worth looking is to buy high yield blue chip dividend paying stocks and leave them in 'Drawdown'. The price/value of these stocks will likely go through a rollercoaster over the next decade or two. However, if it's pension income that you are after, dividends is a very good way to go.
Many of these stocks yield between 3% and 8%
e.g. Royal Dutch Shell 6.1%
BT 6.42%
B.P. 5.91%
Glaxo 5.33%
National Grid 5.94%
Vodafone 9.03%
BCE 5.6%
AT&T 7.15%

Many of these companies also raise their dividends year upon year.

You could also take a good part of your 'tax free component' and place it in an ISA from which future income will also be tax free.

Best of luck.

IanMcL · Post by **IanMcL** » Wed Jan 02, 2019 6:59 pm

Can you take 25% this tax year and 25% next, so you are ok?

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 7:08 pm

J50.
Just to add, the O.P. Has asked a serious question.
I am not about scoring political points, my friend see it as a serious concern. The O.P. Should research the issue for his self to see if he is concerned.

As for my other friend who thought it was too much hassle all round. He works 3 twelve hour shifts Friday Sat Sun at the same company as me and then does Monday to Thursday working his building business. If that gives any perspective.

Bosscat · Post by **Bosscat** » Wed Jan 02, 2019 7:12 pm

IanMcL wrote:Can you take 25% this tax year and 25% next, so you are ok?

No...

https://www.google.com/url?sa=t&source= ... pSVnELlRPd" onclick="window.open(this.href);return false;

J50 · Post by **J50** » Wed Jan 02, 2019 7:21 pm

Lowbank - I wasn't taking it as a political statement and just making sure that I'd not missed anything! Opinion seems divided amongst landlords as to which of the parties is worse for the PRS.

In Ireland they introduced a similar change to the Section 24 tax changes and the ensuing supply/demand changes sent rents up 50% and eventually a few years later the tax change was reversed. It will be interesting to see what happens here.

Clarets4me · Post by **Clarets4me** » Wed Jan 02, 2019 7:25 pm

UnderSeige wrote:One alternative that is worth looking is to buy high yield blue chip dividend paying stocks and leave them in 'Drawdown'. The price/value of these stocks will likely go through a rollercoaster over the next decade or two. However, if it's pension income that you are after, dividends is a very good way to go.
Many of these stocks yield between 3% and 8%
e.g. Royal Dutch Shell 6.1%
BT 6.42%
B.P. 5.91%
Glaxo 5.33%
National Grid 5.94%
Vodafone 9.03%
BCE 5.6%
AT&T 7.15%

Many of these companies also raise their dividends year upon year.
You could also take a good part of your 'tax free component' and place it in an ISA from which future income will also be tax free.

Best of luck.

I would add Lloyds Bank to this list, currently trading at near their 12 month low @ 51p, and yeilding around 6.1% ...

As a footnote, whilst most economists see some disruption coming from Brexit, it pales into insignificance when you see what many are writing about a future Labour Government under Corbyn & McDonnell !!

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 7:37 pm

J50 wrote:Lowbank - I wasn't taking it as a political statement and just making sure that I'd not missed anything! Opinion seems divided amongst landlords as to which of the parties is worse for the PRS.

In Ireland they introduced a similar change to the Section 24 tax changes and the ensuing supply/demand changes sent rents up 50% and eventually a few years later the tax change was reversed. It will be interesting to see what happens here.

I agree, he certainly does not think the Tories did him any favours.

He tells me his return on investment per year is now less than 10%.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 8:07 pm

post 15..Lowbankclaret

Could you please post a link where it shows clearly and unequivocally that Jeremy Corbyn has said that he is pledged ‘to get rid of private landlords’.?

Thank you.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 8:12 pm

hampsteadclaret wrote:post 15..Lowbankclaret

Could you please post a link where it shows clearly and unequivocally that Jeremy Corbyn has said that he is pledged ‘to get rid of private landlords’.?

Thank you.

pssst he is watching the footy

.

TVC15 · Post by **TVC15** » Wed Jan 02, 2019 8:17 pm

You can take 25% of your pension tax free (up to lifetime allowance which is currently £1m).
Your tax free amount should obviously be your first port of call if you want to invest in property and avoid income tax.
Any income taken over and above tax free sum is taxed as any other income (as detailed above).

In terms of investing in property to rent - the recent tax changes have made it less lucrative but that was mainly in relation to people who were borrowing money to buy property and then rent out. The positive of this is that if you are a cash buyer the market is nowhere near as saturated with investors. Of course it all depends on the property, price, condition, rental demand, yield etc. If your yield is less than say 6% I would say that it’s probably not worth the risk given the precarious housing market etc.
The income you would earn from a property is taxable - all depends on how you set up your property business but speak to an accountant and they will give you the best advice re tax efficiency.

As someone has mentioned above whilst the money is in your pension it is outside of your estate for inheritance tax purposes. If you buy a property this falls within your estate - as does any cash proceeds you get from rent or eventually selling the property. The inheritance tax thresholds are quite high now so whether this will ever become an issue for you all depends on the amounts you are talking - again your accountant or a financial advisor will help.

Regarding the whole thing I would definitely go see an IFA / accountant for advice (probably both). I would recommend Egan Roberts in Ribchester - they offer both services.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 8:40 pm

26.. despite so many Tories rubbishing Corbyn to the nth degree.. he’s useless, incompetent, a commie, a liar and all the rest.. if he is all these things (ie. an electoral liability) why do you spend so much time talking about him non-stop?

What exactly are you worried about?
( no need to answer that)

I am not particularly a Corbyn fan, but were you not watching through the 8 year shItstorm of Tory austerity which achieved the square-root of ******* and did a great deal of damage to many peoples lives. All completely unnecessary.

The NHS.
Crime.
Trains
Education budgets.
Prisons.
Social care.
Drugs..
and all the rest that they have made a mess of.

I haven’t even mentioned the ‘B’ word and the farce that that has been for two+ years at least.

We don’t need any lectures from you about ‘future Labour governments’.

We have enough ‘REAL’ evidence about cr@p useless governments before our own eyes.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 8:40 pm

26.. despite so many Tories rubbishing Corbyn to the nth degree.. he’s useless, incompetent, a commie, a liar and all the rest.. if he is all these things (ie. an electoral liability) why do you spend so much time talking about him non-stop?

What exactly are you worried about?
( no need to answer that)

I am not particularly a Corbyn fan, but were you not watching through the 8 year shItstorm of Tory austerity which achieved the square-root of ******* and did a great deal of damage to many peoples lives. All completely unnecessary.

The NHS.
Crime.
Trains
Education budgets.
Prisons.
Social care.
Drugs..
and all the rest that they have made a mess of.

I haven’t even mentioned the ‘B’ word and the farce that that has been for two+ years at least.

We don’t need any lectures from you about ‘future Labour governments’.

We have enough ‘REAL’ evidence about cr@p useless governments before our own eyes.

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 8:42 pm

hampsteadclaret wrote:post 15..Lowbankclaret

Could you please post a link where it shows clearly and unequivocally that Jeremy Corbyn has said that he is pledged ‘to get rid of private landlords’.?

Thank you.

No I cannot!

As I said it’s my friends opinion or perception as to what’s been said as he owns 4 houses.

Does seem kinda logical though.
Railways, make public
Power and water make public.
Go back to council housing.

Kinda a Corbyn think.

Like I said I was answering the O.P request. He needs to check out anything that’s said and make up his own mind.

Personally as I don’t have a house to rent I don’t have an opinion. Just trying to help with opinions that do have money invested in that sector.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 8:45 pm

29.. so am I ..UTC

- just checking whether the words he used were 100% bull**** or not, I very strongly suspect that they are.

We will see.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 8:48 pm

I cannot stand Corbyn and all the looney ideas he stands for. A grade A bullsh-tter. Sorry if that offends any of his followers but that man should not be trusted.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 8:54 pm

lowbank

post 33 - what you have typed is utter rubbish.

See the final paragraph of post 15.
Those are your words and nothing to do with your ‘friends’

Sick to death of posters typing dim nonsense down and pretending it’s all FACT.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 9:22 pm

hampsteadclaret wrote:lowbank

post 33 - what you have typed is utter rubbish.

See the final paragraph of post 15.
Those are your words and nothing to do with your ‘friends’

Sick to death of posters typing dim nonsense down and pretending it’s all FACT.

chill out hampstead. We are staying up

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 9:46 pm

Thanks for the tip.
I’m fine.

All the rubbish on here needs calling out.
I have no problem with people’s opinions.

Tired of reading utter bollux which purports to be factually correct. When you ask them for a link, or proof, or good evidence, they invariably run away.

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 10:10 pm

hampsteadclaret wrote:lowbank

post 33 - what you have typed is utter rubbish.

See the final paragraph of post 15.
Those are your words and nothing to do with your ‘friends’

Sick to death of posters typing dim nonsense down and pretending it’s all FACT.

My bad, badly worded by me. I said it’s a reason he is considering a change of investment.

Be it correct or not he is very well read and follows things closely, he has a massive investment in his housing portfolio. Perhaps you missed the issue as you don’t have your livelihood at stake.

To be fair I am not arsed, I don’t have a house to rent and never will have.

Hampstead, can you provide a link that states this is absolutely not true!

LS7 · Post by **LS7** » Wed Jan 02, 2019 10:29 pm

And another innocent question is followed by well meaning advice before descending into a political argument.

Is it really up the Beehole or a different hole?

LS7 · Post by **LS7** » Wed Jan 02, 2019 10:32 pm

PS anyone with cash or assets or high income should fear a McDonnell and Corbyn redistribution agenda. That doesn’t need quoted sources etc. It’s just obvious.

Can we have a separate forum : up the “a - hole”?

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 10:46 pm

39.. yes it was badly worded.

Why do you keep going on about your friend?
I’m not remotely interested.

I was commenting on the ‘fact’ that you typed, which was nothing of the sort.

Your last sentence in post 39 is simply unbelievable.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 10:51 pm

40... LS7

There was plenty of good advice for the OP, so I guess the thread ‘worked’.

The politics on this thread was not introduced by me.

claretnproud · Post by **claretnproud** » Wed Jan 02, 2019 10:57 pm

I think you are taking things a bit too seriously hampstead. Lowbanks answer to what I asked earlier was good info for me and I am now re considering my approach. much appreciated Lowbank for taking the time to post. I do think Corbyn is an idiot ( just my opinion ) and think if he ever gets in it will be bad bad bad news for our country. I am in disbelief that people cannot see through him.
more importantly though 6 points in 2 games. get in. utc.

hampsteadclaret · Post by **hampsteadclaret** » Wed Jan 02, 2019 11:05 pm

41..LS7

As the vast majority of UK citizens don’t have many assets or high income, then these millions of people might quite fancy a McDonnell/ Corbyn redistribution tag team.

Sensible redistribution policies in a very unequal world are a good idea, which is why nearly every government on the planet has some form of popular progressive redistribution in place.

In terms of the separate forum that you have described and christened, why don’t you launch it you have the key credentials ?

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 11:15 pm

claretnproud wrote:I think you are taking things a bit too seriously hampstead. Lowbanks answer to what I asked earlier was good info for me and I am now re considering my approach. much appreciated Lowbank for taking the time to post. I do think Corbyn is an idiot ( just my opinion ) and think if he ever gets in it will be bad bad bad news for our country. I am in disbelief that people cannot see through him.
more importantly though 6 points in 2 games. get in. utc.

Seriously if you are considering going down this route, email CT. he has phone number and I will ask my two friends if they will chat to you about the in and outs of this investment. You will get two very differing views.

The political bit is hypothetical as there is general election in the offing yet.

Lowbankclaret · Post by **Lowbankclaret** » Wed Jan 02, 2019 11:16 pm

Is no general election.
Miss a word and all he’ll can break loose