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Over 55s could face five-pronged property tax hit

BABY BOOMERS hoping to line their retirement nests with an income from a second property following changes to new annuity rules could be hit with massive five-pronged tax bills.

That’s the stark warning from PwC on the eve of the annuity reforms which kick-in from April 2015 which will, for the first time, enable people to unlock and withdraw their pensions in one lump sum.

But those tempted by property could face five separate tax grabs from the Government on their investment, firstly from income tax when withdrawing from the pension scheme, then stamp duty when buying the property, followed by yet more income tax on any future rental income, capital gains tax when the property is sold and potential inheritance tax issues.

According to the Big Four’s figures, a pensioner withdrawing £200,000 to purchase a £500,000 home will have to shell out around £80,000 in tax.

Those who extract a £100,000 lump sum to secure a £250,000 home will have to fork out between £29,000 and £36,000 depending on where their bracket falls.

Baby boomers – the over 55s – should exercise major caution when considering a foray into a second property, the accountancy firm, adds.

 

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