Financial expert, Jill Kerby
This week, finance expert Jill Kerby provides advice on Capital Gains Tax.
Ms MC writes:
I bought a buy-to-let house in 2005 for €160,000 and sold it in 2015 for €90,000, a loss of €70,000. Clearly, there was no capital gains on that transaction.
However I have another buy-to-let house and if and when I decide to sell it, I am likely to make a profit as I have had it since 2002.
I bought it for €152,000 and it is currently valued at about €240,000, so I might make a profit of €88,000. I have spent plenty on repairs and new windows, doors and a new garage roof. Can I offset the loss of the 2015 house sale against a possible profit of the current house sale?
CGT losses can be carried forward and used against any future capital gain. If you make your expected €88,000 gain on the house you purchased in 2002, the entire €70,000 loss on the 2005 house can be written off. You will only pay 33% CGT on the €10,000 profit balance, less your personal annual CGT allowance of €1,270.
Mr RH writes:
I have a Geared High Yield Fund S9 and a Trilogy II S9 with Bank of Ireland that took a hammering back in the day. Its value has only just recovered to the initial investment. Should I just pull the plug? Really what I'm asking is, can you recommend somewhere that is reliably good and safe and still gives me some growth?
Gearing is an additional risk that many small investors are unfamiliar with and involves the investment manager using borrowed money (as well as your money and everyone else’s in the pooled fund) to boost the volume of assets being purchased.
The great danger is that the servicing cost of that money might go up, and/or that the value of the fund assets in the fund will fall. These funds tend to also incur expensive fees, charges and sales commissions.
You don’t say how much you invested or for how long you’ve held onto this fund, but it clearly has been a loss-maker. I suggest you consult a good, fee-based financial adviser about other options.
Do you have any debt - credit cards, a car loan or mortgage? Paying them off with this money automatically results in a guaranteed ‘return’ in the form of avoided future interest charges. ‘Growth’ of any kind, with effectively zero deposit interest being paid, requires taking investment risk. A good adviser can take you through it and let you decide if another investment is worth doing, both in terms of the time you will tie up your money, and and emotionally.
Ms PC writes:
I am a teacher in full-time employment. I’d like to take out income protection insurance and I’ve heard varying opinions on the merits/disadvantages of this type of insurance. Would you recommend it? I am in my early 50’s with one daughter who is still in primary school.
As a full time teacher my understanding is that you are already covered in the event of illness/serious illness, with up to full pay for at least a year (if you fall seriously ill) and then another six months on half pay.
Teachers who exhaust their serious sick pay benefit may be able to apply for up to four years worth of Temporary Rehabilitation Remuneration. Check with the Department of Education to confirm this and then see what options exist if you can never return to work.
If you are worried that this benefit would be insufficient, you could look into buying a private Serious Illness policy from a life assurance company.
These pay tax-free cash lump sums for a selected group of serious illnesses/conditions, but they aren’t cheap: the older you are, and the longer the duration of the policy, the more expensive they become.
Also, pre-existing illnesses or condition could result in a premium ‘loading’ that may make the cost unaffordable. Ideally, you take out a policy like this until retirement age. They offer some financial peace of mind, but at a price.
Ms MG writes:
I am 63 years of age have six children and was unfortunately a stay at home mother with a good credit history until our mortgage fell into arrears.
Now I find myself unable to borrow anything but have remaining credit card debt of €12,000. I have a bank account with a small overdraft facility and €8,000 saved in the local credit union.
My husband is a gambler and his state pension is paid into my account each week. I earn €350 a month as a cleaner. I need some financial advice and guidance.
I’m so very sorry to read about your difficult financial position. From your (longer) letter it sounds as if you are estranged from your husband and that any other financial assistance is very irregular.
If you haven’t already done so, you need to contact your local MABS office, the free money and budgeting advice service. In association with MABS, the Insolvency Service of Ireland have debt solutions (see www.backontrack.ie) which are designed just for people like you.