Property investors given tax warning & shown how to 'save huge amount in tax'

Tax: Personal finance expert provides advice on investments

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You can make more money and “save huge amounts in tax” by investing your money into a diverse portfolio rather than property, investment expert Jordan Gillies explained. Mr Gillies from Saltus, a financial planning and investment management company, shared his expertise on how exactly Britons can make these “huge” savings.

On a video posted on Linkedin, he used an example of Olivia, who had a diverse investment portfolio, and how she could make £92,300 a year free of tax with the figures he worked with.

He said: “She will only pay an annual total of £7540 in tax.

“This shows how over 10 years a property investor will pay £369,200 more in tax than Olivia, with the diverse investment portfolio.

“I’m not saying property is all bad, as there can be a great reason to hold it as part of a diversified investment plan.

READ MORE: Capital gains tax: Sunak could ‘significantly’ hike tax on assets

tax free

25 percent of Olivia’s pension can be accessed completely tax-free (Image: GETTY)

“But please do make sure you take into consideration the tax you might pay.”

When comparing two retired investors, he gave an example of James, a pure property investor who holds only rental properties, and Olivia, who holds her assets in different tax vehicles that are available to everyone.

Even though both James and Olivia have assets and income worth £2,500,000, they will be taxed differently.

Mr Gillies continued: “James will be making £130,000 in net rental profit.


“Unfortunately, all of this is taxed as income and will be in excess of £125,140.

“As a result, James loses his entire tax-free personal allowance so that means every penny of his income is taxable.”

Due to standard tax rules, the first £37,700 will be taxed at 20 percent, and the remaining £92,300 of his annual income will be taxed at 40 percent.

“This means James would pay a total of £44,460 in tax,” he added.


Your tax will be different depending on if you invest solely into property, or other tax vehicles (Image: GETTY)

When comparing these numbers to Olivia, Mr Gillies explained the different tax machines a person can invest in to save money on tax.

Good places to invest your money and diversify your portfolio include pensions, ISA, general investment accounts or bonds.

Olivia had one million invested into her pension and ISA accounts, £300,000 in her general investment account, and £150,000 in a bond.

Mr Gillies went on to explain: “25 percent of Olivia’s pension can be accessed completely tax-free … so she can take £10,000 every year from that pension tax free cash so it will last throughout retirement.

“She then takes a further £50,270 from the pension on top of that and actually it’s only this 50,000 that she’s going to take as income so Olivia will have her full tax-free personal allowance, so £12,570 of this will be completely tax-free.

“It’s only the £37,700 of that £50,00 that will actually be taxed at 20 percent. She then takes another 50,000 from her ISA which is completely free of tax and £12,300 a year from her general investment account using her annual capital gains tax allowance so again no tax.

“Finally, Olivia can take five percent in tax deferred withdrawals from her bond every year so that takes us to the final £7430 from here to make up the full 130,000.”

It’s important to emphasise that although it may sound complicated, apart from the bond this is fairly straight forward tax planning.

Following this example, we see how Olivia makes £92,300 free of tax each year meaning she saves much more on tax than sole property investor James.

Ultimately if your objective is to save tax, it may be best to go and speak to a financial planner.

Roy Walsh

Roy Walsh

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