In a recent YouTube video I discussed how you can legally reduce your UK tax bill using property. Some people think avoiding tax is immoral, but I would encourage you to pay as little tax as you can within the law. That way you can be a compassionate capitalist, donate to charity and start your own foundation to really help causes you care about. Just because you don’t want to give your money to the government doesn’t mean you don’t want to help people with your money. As far as possible legally, make sure that you are the custodian of your own money and can ensure it goes towards things you believe in.
The rich minimise their tax obligations and if you want to be rich, you should too. Taxes are designed to take from those that have not been educated about how to plan correctly. If you want to begin building generational wealth you need to learn to use these tools. In this article, I am going to lay out a 3-step-plan to legally reduce your UK tax bill using real estate.
1. Buy Well
You need to find an area where house prices have bottomed out and are heading back up. Most people won’t be interested in buying at this point. Most people will be looking to buy in areas that are booming and are going to be heading back down soon. This is human psychology. The people that make money are those that go against this psychological pull.
Next, you need to find a property with good cash-flow. If you are getting good cash-flow from a property, you can afford to hold the property even if prices drop further. Many people want to sell when prices drop; this is human psychology too. You need to also go against this psychological pull as well and hold through any price drop.
2. Refinance
Historically property prices double every 10 years. Now, past performance is not indicative of future results, but this is the very long term trend. When your property goes up a lot you will be tempted to sell. However as soon as you do, you are liable for capital gains tax. Not only that, you lose the rent you are currently getting from the property.
Instead, you should refinance the property. This means getting a new mortgage against the new value of the house. Because this is debt, there is no tax to pay, plus you keep the property and the rent.
3. Buy Again
Now you have money in the bank from the refinance, you need to find another property to put that money into. The same rules apply as in step one. Find an area that has bottomed out and a high cash-flowing property. Rinse and repeat, over and over again. Because you refinance each time there is no realised capital gains, so you don’t pay capital gains tax. Because you are picking good cash-flowing real estate, you can continue to pay the mortgages on the properties while increasing your income each time. This is how you get rich from property while paying less tax!
