Yes, dividends incur income tax and you can get tax relief on that.

In my opinion, most people should either avoid them or allocate a small part of their portfolio. The thing is, most of these investments will fail, some will do OK, and a few will be mega winners (Revolut, FreeTrade for instance). The few winners will make up for the losses and then some. But it’s just hard to know which is which upfront :)

Ah, cool. Thanks for clearing that up.

So then do dividends count as income for the purpose of tax relief? If I’m paying myself via a ltd company in a tax efficient manor, I technically wouldn’t have any income tax to claim relief from, right? – only dividend tax.

Would be great to hear your thoughts on these kind of investments

Thanks for your kind words, Paul! The income tax relief on VCTs, EIS, SEIS is for individuals not for limited companies.

Have you ever considered investing in a VCT and getting a 30% tax break? Seems like a nice way to diversify and reduce the tax bill, but I’m concerned that this would have to be done via the trading company rather than the investment company as there’s isn’t any corporation tax to get relief from on the trading company, only dividends.

Any idea how this should work?

Hi John, the government is attacking BTL investors but leaves corporations untouched. Which is why I think the BTL paradise for the amateur investor/accidental landlord will cease to exist and will give room to only the serious ones. I mean those who create companies and are in for the long term and of course, the professionals who do it for a living.

I see Property partner to belong more in the professional side and I think investors can benefit from the tax breaks it offers, while also enjoying the 100% exposure in bricks and mortar. Not sure I agree with your view that big investors push the risk to smaller ones, as I know a few high net worth individuals that invest some serious money on the platform. Why? Just because of the benefits it offers such as location diversification, low costs and hassle-free property investing.

There’s definitely the risk of the platform and the company itself failing which no one wants to experience. So you’ll have to factor that in when investing. I plan to interview 2 senior people from the PP team soon, with a focus to address those concerns. Both of them have experienced multiple recessions given their background and I look forward to hearing what they have to say.

Thanks, Kavita for your kind words. I was told there is an option to write-off the loans and claim ER in the trading company if that’s what you want. I will be facing this problem in ~5 years time that I hope I’ll achieve financial independence. However, I may keep my IT company open for having the opportunity to land some contracts if I want to. Will see.

I have a query about investing from company. If you create another company for investment, you’ll transfer the money in it from from you trading company, which would bein the form of a loan. As I was informed, you can not close your trading company unless all the loans are paid off (which essentially will not happen for a long time with the interest/dividend income). That will also prevent you from closing the company and so from being able to avail entrepreneurial relief as well. Not sure, if I am missing something here.

Hey Rob, sorry I kept the business expenses for home very brief. The plan is to write a separate post as this requires more than a few sentences! Yes, you can claim the mortgage interest as well as rent but not capital. You can only claim the percentage of time you use for doing business. So say you work for 30 hours a week in a play room that you share between personal and business. The room is 1/4th of your home. Then you can claim (30/168) * (1/4) = 4.46% per week. So if you’re paying £1,000 rent/interest, that is
£1,000*4.46% = £44.6 a week or £2,320 a year.

See also business use of home from Freeagent. I believe that’s much better than the simplified £4 ‘Use of home’ per week, but you’ll have to justify it if investigated.

I’m just going by what I’m told by my accountant and the internet. That’s not tax advice :)