Landlords, EIS & VCT
If you’re a landlord with rental properties in Peterborough, it’s likely that you’re feeling the squeeze of increased regulations and rising mortgage and taxation costs. Maybe you’re considering selling your rental property to free up cash, but you’re unsure of the tax implications and how to invest your money wisely.
That’s where a financial adviser can help. One solution could be investing via tax schemes such as The Enterprise Investment Scheme (EIS) or a Venture Capital Trust (VCT). The government has set up a framework to incentivise investing in companies in the early stages of development with generous tax breaks.
Landlords could use the EIS investment to defer the capital gains tax they would have incurred upon selling their rental property. This means that gains would only come back into a potential charge when the individual companies within the EIS portfolio were sold allowing any tax on the deferred gain to be spread over several years making use of multiple years’ capital gains allowances.
Moreover, EIS offers up to 30% upfront income tax relief on investments and the potential to make tax-free gains. Investors could also claim relief on any losses incurred by individual EIS-qualifying companies in a portfolio.
But that’s not all. Landlords could invest some or all of the capital from the sale of their rental property into a diversified portfolio of investments to target an income. One option is to invest in a Venture Capital Trust (VCT), which would allow them to target a tax-free income while diversifying their existing sources of rental income.
VCTs invest in a diverse portfolio of early-stage businesses and offer tax relief to compensate for the risks of investing in these types of businesses. Like in the case of an EIS, the investors could claim 30% upfront income tax relief when investing in a VCT and pay no tax on any income they receive from an investment.
However, it’s important to note that EIS and VCT investments are long-term, higher risk investments, and the value of the investments and any income from them could fall as well as rise (but at least you don’t get anyone not paying the rent or refusing to move out!). Like any investment you may not get back the full amount you invest. Additionally, tax treatment depends on individual circumstances and may change in the future, while VCT shares and the shares of early-stage companies may be more volatile and harder to sell than those of larger listed companies.
Overall, if you’re a landlord in Peterborough looking to sell your rental property, it’s worth seeking the advice of a financial adviser to help you navigate the complex tax implications and invest your money wisely to achieve your financial goals.
Michal Zin
Independent Financial Adviser
Brooks Wealth Management
info@brookswealth.co.uk 01733 314553 www.brookswealth.co.uk