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24-hour loan secures retirement plans for private landlord

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Derbyshire, UK

The retirement plans of a private landlord were put in jeopardy following the ending of tax relief on Buy-to-Let mortgage interest on 4th April 2020…until Bridge Help stepped in with a solution.

The client explained: “The long-term prognosis for private landlords doesn’t look good. A heavy building programme means an increased supply of housing stock and the Covid-crisis could result in a possible rent reduction.

“The ending of tax relief on mortgage interest meant that there was a real risk that my investment would be untenable until I was advised to incorporate my property portfolio which had mortgages secured against it. My future retirement plans are now back on track.”

He began building his property portfolio in 2003 and has since acquired 10 one and two bedroom, primarily new build, properties of the South West. From the outset these were a long-term investment for Ashley, who has plans to benefit from an income from them when he eventually retires.

As the change in tax relief affects people who own their properties as individuals (or couples), rather than through a business, the client’s barrister advised him to establish a limited company and transfer ownership of the properties to it.

As a director of the company, the client will be able to draw down on funds in to provide an income for his future retirement. Speaking of the arrangement, he said: “It made good sense to me and was very low risk.”

Bridge Help was able to support him by providing a 24-hour loan to enable the properties to be moved into the new company. The short-term loan attracted a small transaction fee.

He explained: “The whole bridging loan process was straightforward and well organised.”

By transferring the property portfolio to the new limited company at the original acquisition price, further tax savings were made as it mitigated the potential liability for Capital Gains Tax.

As well as saving Capital Gains Tax, by placing the properties into a limited company, he will now be able to claim 100% mortgage relief.

Looking to the future, the incorporation of his property portfolio means Inheritance Tax will also be negated should the client choose to pass it onto a member of his family.

He added: “I am now in a position whereby I have considerably mitigated a substantial tax liability enabling me to keep my property portfolio as it is and look forward to a comfortable retirement.”

In March 2019, Bridge Help urged private landlords to act quickly in to avoid facing hefty tax bills or even being left out of pocket and forced to sell off their property portfolio. the warning came amidst the ending of tax relief on Buy-to-Let mortgage interest. The tax break was instead replaced with a blanket 20% tax-credit, based on mortgage interest payments, on 4 April 2020.

To counter the change in tax relief, Bridge Help’s team of solicitors, accountants, barristers and tax experts, developed a solution for landlords who have outstanding loans of their properties. The solution enables them to continue to enjoy tax relief on loan interest while not having to pay Stamp Duty Land Tax (SDLT) or Capital Gains tax.

If you’re a private landlord with outstanding loans on your properties, get in touch with Bridge Help’s specialist team today. We can help save you a significant amount of money long-term on your investment.

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