Sole Trader buying a commercial unit

[thetowen]

I'm a sole trader which have been offer the current unit I'm in at a good price . If I got a loan over about 6 to 10 years it would work out cheaper that the current rent.

I was just wondering are there any other costs involved in owning the unit apart from the buildings insurance that as a tenant I wouldn't be currently paying?

 

[Joe_90]

If your paying the insurance and rates already then no. Have you considered the taxation costs of not have a rent as a deduction. The capital element of the repayment has to come from after tax income.

If you are currently paying €10k in rent you don't pay any tax on that, but now you will have extra tax to pay and also the capital element of the mortgage.

 

[Bateman]

7 year CGT exemption might be a positive for you.

Essentially buy and hold for seven years and any gain is not subject to CGT. Sell after seven years and your taxable gain is reduced pro rata (e.g. sell after 10 years and only pay CGT on 3/10 of any gain).

 

[kkelliher]

The only other costs would be maintenance of the building, if its in an estate there will be a management charge, rates if not already paying, buildings insurance as you would now own the building and waste disposal etc if not already paying

 

[thetowen]

If your paying the insurance and rates already then no. Have you considered the taxation costs of not have a rent as a deduction. The capital element of the repayment has to come from after tax income.

If you are currently paying €10k in rent you don't pay any tax on that, but now you will have extra tax to pay and also the capital element of the mortgage.

Thanks everybody for your replies. I was going to get a loan from my parents. At the moment I'm paying 12000 a year rent but, I was going to pay just over half that in repayment to my parents so I could earn a little more money for myself. I'll need to figure how much extra tax I'll need to pay.

 

[Joe_90]

Ok so think about it this way. In 2012 you had a deduction of €12k so no tax on that. In 2013 you have no deduction. So if your on the higher rate of tax then €12k x 52% = 6k in tax and 6k in repayments so your in the same boat until the repayments are finished.