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Posted by Anonymous to swanage view
Monday, July 04, 2005
Property Prices & Second homes
Just when you may have thought things couldn't get worse for local families wanting to buy a home along comes something with the potential to make housing here even less affordable.The rules about self invested pensions will change next year and anyone with a big enough income to justify one of these will be able to buy a second home as a pension assett. All the tax saving rules about pension contributions will apply so they can renet it out tax free and even avoid capital gains tax so long as the profits go into the pension fund. They will even be able to borrow to buy to the tune of 50% of what is already in the fund. The effect is that someone buying a £300,000 flat and paying tax at the 40% rate only needs to find £180,000 with the tax break covering the rest. If there is enough in their pension fund they can borrow this, rent the place out and cover the mortgage from rental, paying no tax on the rent.It will of course be possible to invest in a Tuscan Villa but the compexities of international tax regimes make it a lot easier to buy in the UK.What a wonderful example of joined-up government when they are pretending to encourage more low cost housing!
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Posted by Anonymous to swanage view at 7/03/2005 06:03:02 PM
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Posted by Anonymous to swanage view
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3 comments:
But they HAVE to rent them out, so these will be preferable second home owners, or not?
They dont have to rent them out. The change lets residential investments be treated in the same way as comercial investment property for pension plan purposes. The point I was making was that it looks as if there will be anoter twist to the inflationary spiral of house prices as a result of the government changing the rules under which the well off pay for their pensions. If you have enough money you will be able to buy a holiday property and leave it empty but if you do rent it out the income will not be taxed if it is paid into your pension fund. If you borrow to buy you are getting tax relief on your interest payments, something abolished years ago for the rest of us.
While it is no doubt highly laudable to make investing in a pension fund attractive I think its the thin end of the wedge when the effect will be to make property even less affordable for most of us simply to benefit people with incomes measured in hundreds of thousands.
Keith Roker
I say we do what they do in Cornwall , burn second homes down
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