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It is always important to get a wide range of advice when completing a large investment like a Buy-to-let (BTL) mortgage. As a trusted Colchester-based BTL, Commercial and Bridging Loan Broker, Advocate Finance can help with specialised advice on all aspects of today’s rapidly changing market.
But getting a wider view of how a large investment like a BTL or commercial mortgage fits into your broader financial portfolio can also be worthwhile. We spoke to one of our contacts, Dominic Pape, about how a wealth management service can help you to maximise your income and tax efficiency by considering further financial options.
Interview
Advocate Finance (AF): Hi Dominic, please provide a background for our clients on your company, Parallel Wealth Management (PWM).
Dominic Pape (DP) PWM started out as Pape Wealth Management in 2014. In 2020 50% of the business was acquired by Jonathan McMahon, who is the former Chief Operations Officer (COO) of St. James’s Place and also a former Director of the Central Bank of Ireland. The business was then rebranded to Parallel.
With a combined 150+ years of financial experience in the business, our team is responsible for the management of £170m of client funds. Our clients comprise a broad range of business owners, trusts & individuals. We have offices in Cheltenham, Ipswich & London.
AF: A lot of investors seem to view their business and their property portfolio as their primary investments, but this does carry the risk of being overexposed. Can you explain the possible solutions people should be looking for by discussing things with yourself for mitigating exposure risks?
DP: The key to a successful portfolio is not being overexposed to any individual asset, but also reducing the unseen losses that can be incurred via tax. Often, we find clients can become fixated on the gross return, rather than focusing on net income, after tax & expenses. We advise clients to consider using their allowances as the starting point for planning.
• Are they using their Capital Gains Tax Allowance?
• Are they using their Pension Allowance?
By considering aspects like this, we can help clients maximise their tax efficiency and thereby grow their wealth more effectively.
[AF: Since we spoke with Dominic, this issue has become even more important, given some of the measures announced in Chancellor Jeremy Hunt’s 2023 Budget: the Lifetime Allowance (the maximum value of the funds people can accumulate in their pension pot before paying additional tax) has been scrapped, and the annual tax-free pension allowance will rise by 50% from £40,000 to £60,000]
AF: We understand that there can be tax benefits, depending on how your income is organised. Can you please give us an overview of some of these?
DP: The amount of tax you pay will be dictated by how your income is structured, so it is important that you organise this in the most efficient way.
• Are you paying yourself a salary?
• Are you taking dividends as income?
Once you have decided on this, it is important that your funds are invested and growing in a tax-efficient environment. This could be by setting up a trust, or via a self-invested personal pension (SIPP)*. There are many ways an investor can maximise their tax efficiency.
AF: Is there anything else you feel our property investors/business clients should be thinking about regarding financial planning?
DP: If clients are looking to purchase commercial property, they should definitely explore doing this via a SIPP*, as the tax benefits are considerable. Other than this, clients should be looking to minimise their tax payments by putting together a tax-efficient plan with their advisers.
[*A SIPP is a method of saving and investing for your retirement. It’s a tax-efficient investment ‘wrapper’ used to build a pot of money for the future. It works in a similar way to a company pension except it is organised by the individual, not an employer.]
Advocate Finance would like to thank Dominic for his time and generous advice.
For further information, contact Parallel Wealth Management via their website or by calling 01473 550 492.
How can Advocate Finance help?
Advocate Finance is a specialist buy-to-let/commercial mortgage & bridging Loan Broker, our advisers can provide a personalised mortgage/loan illustration tailored to your individual circumstances.
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