Clause 24 (Interest rate Relief Changes) Property Tax


Hi, in this short video I’m going to talk
to you about the tax changes that were brought in that started in April 2017. They’re gonna run through for four years to get them fully in place, and it’s
called Clause 24, also known as interest rate relief changes, mortgage interest
rate relief changes. It’s the main tax change that affects property investors
and this video is really here to help get rid of some myths, debunk some myths
that are getting in the way and to give you some clarity so you move forward
with purpose and get on with investing because property investing is
outstanding. It gets you great results if you understand it and do it properly and
people are panicking because of the tax changes or it’s making them fearful and
it’s giving them an excuse not to move forward. Notice I say excuse, we should
never live with excuses we should live with ownership accountability and
responsibility we should own our decisions and part of owning that is
understanding the tax which this video will help you to do and then moving
forward with purpose and with a vision, okay, and my other videos can maybe help
with some of that. So who does this actually affect and how does it
work and you know what’s the impact of it really, bottom line. So I want you to
understand first of all if your income by 2021 will be fifty thousand pounds or
less the clause twenty four tax changes do not impact on you at all, and if you’re
in a couple and your income is a hundred thousand pounds or less as a couple and
you set things up properly, clause twenty four does not impact you at all. So you
know a lot of people I speak to might have one of the spouses earning
fifty thousand a year the other is a homemaker earning nothing or
maybe only ten thousand a year and you know they say what do we do? Well you can set things up and I’ll cover it in the end of this video using a deed of
trust and basically use both people’s allowances up to that hundred thousand
pound threshold. You just need to know what you’re doing and know how to do it. So more on that later on so, but if you’re a hundred thousand pounds or less
as a couple or if you’re an individual £50,000 as an individual stop worrying
about it does not impact you, does not change anything. Okay? If you’re going to
be over those thresholds If you’re gonna be over 50,000 pounds or over a hundred thousand pounds as a couple, if it’s minimally over, impacts not big, just
get on with it, okay, but if you’re already for example a
40% tax payer and then you’ve got your properties on top and then this is going
to impact you then you need to be thinking about it. You need to be making some decisive decisions about what you need to do to minimise the impact
of this tax change. Okay, so what do we need to cover? Well first of all how do
you work out what your income level is if you’ve got your own employed or
self-employed income and property income? Well, the way that the new changes work
is slightly different in how you work out your income threshold. So you take
your employed income. Let’s say somebody was on thirty thousand pounds a year of
employed or self-employed income and that’s before tax, and then on top of
that you take the properties that you own, you take the rent that comes in, you
knock off all the costs apart from the mortgage, so you can knock off their
letting agency cost, you can knock off the insurance that you pay, any
maintenance costs. So let’s say, you know, I rent a property out for six hundred a
month and then my costs going out are about two hundred a month, so I’m left
with four hundred pounds a month before I pay the mortgage. So that’s about five
thousand pounds a year, so I’ve got buy-to-let properties like that, okay,
maybe in the Midlands or the north in that example, they’re worth five thousand
pounds a year. So if I’ve got four of those my thirty thousand pounds plus
those four would get me to 50. I’m fine. If I had five I’m just tipping over I’m
fine. If I had eight, now I’m tipping over
quite a lot. Eight lots of 5,000 is 40,000 plus my thirty thousand now I’m at seventy. Now these tax changes are going to start to really bite and to impact me. Okay, now by
the way, if I’m just starting out and I’m on thirty thousand I would buy the
first few houses still just in my own name. Now I’m not an accountant, I’m speaking to tens of thousands of people on this video and I
can’t know all your personal tax situations. I can’t know all where each
and every single one of is, so I can only give you a framework to then go away and
speak to your accountant about. Okay, but as a basic principle for ninety eight
percent, let’s say, of the population, if you’re under that fifty thousand,
until you get to it, keep buying in your own name. So thirty thousand, I buy
another one, I buy another, another, another. When I hit fifty then I
consider what to do next, okay? Now, I say 98% of people if your income, your
personal income is going to grow beyond fifty pretty quickly, you know you’ve got
a growing business or you’re getting promoted all the time and you’re gonna go through
it, you know, you’re gonna keep these hours for forty, fifty years but within three years you’re gonna be beyond 50 thousand personal income, then
you might consider what I’m about to talk about, okay. But if in principle
you’re gonna keep earning the same amount of money the same type of money
you buy them in your own name until you hit that threshold, okay. Now if you’re
the other end of the scale, so if you’re already a 40% tax payer through your
income and your properties you already have, or just through your income you
already have, then for 98 percent of you buying in a limited company is going to
be better. Putting the properties in a limited
company rather than just your own name will be the best structure for you. Now
there are advantages and disadvantages for that. In a limited company while
you’re growing the portfolio it’s a great place to hold them because in a
limited company corporations tax, the government have committed to getting
that down to 18 percent payable, whereas in your own name you’re paying 40% tax
on your profit so your rental profits and all that kind of thing. However if
it’s in the limited company the properties belong to the limited company
so when they go up in value and you release some equity to buy some more, or
to spend on a holiday, or have some fun with, it’s the limited company that has
the money not you. And it costs money, you know, costs dividends or tax potentially
to get it out. So if you’re in growth phase and growing your portfolio for
10-15 years a lot of 40% tax payers are like, well, this is an investment for the
future. I don’t need the money now, a limited company can be awesome and then when your personal income drops in 10, 15, 20 years when you retire then you can
start to draw out using dividends and take the money back out of the limited
company that you own, okay, but it’s great to grow in that limited company. If
you’re a 40% tax payer but only for another 3-4 years because then you’re
gonna be retiring and then you’ll spend another 30 years of your life you know,
we want to live that long, another 30 years of your life with a lesser
income, then you might take the hit today and buy in your own name, that’s the 2% I’m talking about might buy in your own name because longer term, over the longer
term period, you’re going to spend a lot more years under that threshold. So I wanted
to just give you a feel for that, I wanted to give you a feel for that. There are also strategies that you can use if you’re somebody who is in that
threshold already, that 40% threshold and you’ve already got property so this is
impacting on you. People say, well what do I do? Do I move my houses into a limit company today? Do I, you know, how do I handle this? What do I do? And I can’t in a short video like this cover that, so what I’ve done I
went an interview five of the leading property tax accountants in the UK. I
believe in mastery, so whenever I’m teaching something to my clients I want
it to be the best advice, so I go to the masters. I went and interviewed five of the
leading property tax accountants and I said, look, what do we do if this is our
situation because with 200 properties this is definitely my situation, and they
came up with 10 strategies that you can use to minimise the impacts, okay but
I can’t cover them on here. It takes a lot longer to cover so what I’ve done is
just below this video there’s a link, okay, and if you click that link it’ll
take you to my tax webinar which takes about an hour and 15 minutes to watch
but it goes through this in absolute detail so that you can understand this
fully and make some real great decisions for yourself on how you should be
managing this going forward. So, yeah, so if this is something you need to
manage and to master go watch that webinar and that will give you enough
information to be in a great position of power when you’re speaking to your
accountant to ask the right questions and to get yourself set up properly with
this. My final piece of advice is, is your accountant a property tax
expert? You see, when I started out investing in property I started out and
I went to my business accountant to set up my property stuff. He was an expert in
business, really good at that, business accounts but I didn’t know, not an
expert property, so my first six properties I bought in the wrong
structure, and when I got around real professional property investors that
knew what they were doing and they explained the structures I realised I
was doing the wrong thing. So these days I only take advice, throughout all my life in property from people who are real true experts,
that are doing it themselves, walking the walk, talking the talk, but the expertise
in that area. So you need to make sure you’re working with a property tax
expert not just your local accountant, or the one you’ve always used because
it’s convenient, so they fully understand this stuff, but once you watch the full
video if that’s of use to you, you can then make sure you’re asking the right
questions and checking you’re working with the right people. Okay, so my final
message is these tax changes if you’re over that 40% threshold, yes it does cost
you a bit more in tax, okay. If your below it doesn’t, so stop worrying
but bottom line versus any other investment in the UK there’s no other
investment where the banks will lend you 75% of what you need to buy something. You know, you buy stocks and shares you have to put all the money in.You buy a
hundred thousand pounds of stocks and shares you have to pay it all. The bank
won’t lend you any money. It goes up 10%, you make 10%. In property they’ll lend
you 75% of the money so you only have to put 25% in. If it goes up to 7% you actually
make a 40% return so get on and buy property. Do not ….I’d rather you bought five properties with the wrong tax structure because you’ll still be making great
money then, because you’re not sure about the taxes you don’t buy any. So get on,
take action, buy some property. Bottom line – Invest with Knowledge, Invest with
Confidence, Create Financial Freedom. I’ll speak to you soon.Thank you. Hi guys, it’s Aran here Did you enjoy this week’s video? If so, there are three
things you can do to continue your property investing journey. The first is
you can click here and subscribe to my YouTube channel. I really hope you do
because then each week I can keep sending you great educational videos
just like this one so you can keep developing your property knowledge. Secondly, you can click the link here and get a free copy of my book, The Property
Coach, where I teach the 9 steps to really truly successfully building a
property portfolio.The third thing you can do is click here and go to my web
site www.arancurry.co.uk and there you can subscribe for free to my newsletter. What
that means is you’ll get loads of free educational content in lots of different
forms and also any of our promotions or offers that we run, are also there on the
website, and also in those newsletters, again helping you move forward with your
property investing journey so if you want to take action just click any of
these three boxes or all three and move forward to the next level and in the
meantime Invest with Knowledge, Invest with Confidence, Create financial freedom
thank you.

5 comments

  • James Robertson

    …what happens if you borrow all this money, with the banks lending 75% of the amount, and house prices go down? 😮

  • Annette Broomfield

    Help, please. The link does not take you to the video and I can't see it in your playlist.

  • Great video – this is explained so clearly – at last. Thanks for this Aran. I’m subscribed !!

  • I have no job – but I have 4 London flats that earn £60k a year (before costs ) will this hit me hard ? What should I do ?

  • Great video Aran!

    Very clear, concise and straight to the point.

    Very helpful – Thank you very much.

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