Conor O’Sullivan, of O’Sullivan Financial Planning, had a client who was treating his buy-to-let portfolio as his pension but changes to income tax on buy-to-let investors significantly increased the tax he was paying and he wanted to start making pension contributions as a plan B. Conor said: “He made good profits which he paid Corporation Tax on, paid himself a dividend from these profits and paid personal income tax on this, and then sought to purchase properties where he was paying income tax on the rental income received. In effect, he paid tax on the same money three times.”
To combat this, Conor started a pension so his client could transfer cash from his business to himself without paying tax. Conor then introduced his client to Kilby Fox. They find tax efficient solutions for buy-to-let landlords and recommended the portfolio was transferred into a Limited Company. Kilby Fox partner Martin Crooke said: “The new Limited Company’s structure meant the tax bill reduced by approximately £12,000 each year, and we created a pool of about £600,000 that the client can draw down with zero tax implications.
"The client had borrowings against the properties so we found a new lender to redeem the mortgages and lend to the Limited Company. We also needed a solicitor to convey the property titles into the new company."
A meeting at a Chamber event resulted in Wilson Browne Solicitors handling the conveyancing of the portfolio working closely with Billings Mortgage & Insurance; Insurance Services who arranged the lending. Conor added: “This took nearly 18 months and cost a reasonable amount in fees. However, over the next five years these changes should save nearly £250,000 in tax. Furthermore, now his personal income has reduced, we can contribute £40,000 annually into his pension tax free.”
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