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***BUYING PROPERTY THROUGH LTD COMPANY***
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I spoke to a CHARTERED accountant yesterday & asked a bunch of questions about buying property through a Ltd company vs Buying personally to rent out.
Let me go straight into it & hope this helps!https://abs.twimg.com/emoji/v2/... draggable="false" alt="✅" title="White heavy check mark" aria-label="Emoji: White heavy check mark">https://abs.twimg.com/emoji/v2/... draggable="false" alt="✅" title="White heavy check mark" aria-label="Emoji: White heavy check mark">https://abs.twimg.com/emoji/v2/... draggable="false" alt="✅" title="White heavy check mark" aria-label="Emoji: White heavy check mark">
Pro’s vs. Conshttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🤓" title="Nerd face" aria-label="Emoji: Nerd face">https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Downwards arrow" aria-label="Emoji: Downwards arrow">https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Downwards arrow" aria-label="Emoji: Downwards arrow">https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Downwards arrow" aria-label="Emoji: Downwards arrow">
I spoke to a CHARTERED accountant yesterday & asked a bunch of questions about buying property through a Ltd company vs Buying personally to rent out.
Let me go straight into it & hope this helps!
Pro’s vs. Cons
PROs: https://abs.twimg.com/emoji/v2/... draggable="false" alt="✅" title="White heavy check mark" aria-label="Emoji: White heavy check mark">
• Tax efficiency - if you’re a higher rate tax payer (we’re all on £100k+ so this includes everyone), you will pay corporation tax at 19% of the PROFIT rather than 45% of your rental income tax. There are also rumours the corporation tax will be going to 17% lets seehttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👀" title="Eyes" aria-label="Emoji: Eyes">
• Tax efficiency - if you’re a higher rate tax payer (we’re all on £100k+ so this includes everyone), you will pay corporation tax at 19% of the PROFIT rather than 45% of your rental income tax. There are also rumours the corporation tax will be going to 17% lets see
• Limited Liability - Because it’s a Ltd company, you will not be personally liable https://abs.twimg.com/emoji/v2/... draggable="false" alt="😅" title="Smiling face with open mouth and cold sweat" aria-label="Emoji: Smiling face with open mouth and cold sweat"> for any losses meaning creditors only have access to the company’s assets.
• Long term, there are inheritance tax benefits i.e you can make family members shareholders in your company.https://abs.twimg.com/emoji/v2/... draggable="false" alt="👨👩👧👦" title="Family (man, woman, girl, boy)" aria-label="Emoji: Family (man, woman, girl, boy)">https://abs.twimg.com/emoji/v2/... draggable="false" alt="💰" title="Money bag" aria-label="Emoji: Money bag">
• Long term, there are inheritance tax benefits i.e you can make family members shareholders in your company.
• Multiple shareholders - if you have family/partner who earn a lower salary you can pay them a salary/dividends & take full adv of their tax allowance.https://abs.twimg.com/emoji/v2/... draggable="false" alt="💰" title="Money bag" aria-label="Emoji: Money bag">
• Through a Ltd company you can reinvest the rental income/profit from the business into more property/marketing etc.https://abs.twimg.com/emoji/v2/... draggable="false" alt="✅" title="White heavy check mark" aria-label="Emoji: White heavy check mark">
• Through a Ltd company you can reinvest the rental income/profit from the business into more property/marketing etc.
CONs https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚫" title="No entry sign" aria-label="Emoji: No entry sign">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚫" title="No entry sign" aria-label="Emoji: No entry sign">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚫" title="No entry sign" aria-label="Emoji: No entry sign">
• There are more costs/paperwork involved i.e accountancy fees and preparing year end accounts for submission to your accountanthttps://abs.twimg.com/emoji/v2/... draggable="false" alt="📝" title="Memo" aria-label="Emoji: Memo">
• Buy-to-let mortgage rates through Ltd companies tend to be slightly higher than if you were buying personallyhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="📈" title="Chart with upwards trend" aria-label="Emoji: Chart with upwards trend">https://abs.twimg.com/emoji/v2/... draggable="false" alt="📈" title="Chart with upwards trend" aria-label="Emoji: Chart with upwards trend">https://abs.twimg.com/emoji/v2/... draggable="false" alt="📈" title="Chart with upwards trend" aria-label="Emoji: Chart with upwards trend">
• There are more costs/paperwork involved i.e accountancy fees and preparing year end accounts for submission to your accountant
• Buy-to-let mortgage rates through Ltd companies tend to be slightly higher than if you were buying personally
• Mortgage Availability is more limited through Ltd company with less products available, although this is changing fast.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🙅🏾♂️" title="Man gesturing not ok (medium dark skin tone)" aria-label="Emoji: Man gesturing not ok (medium dark skin tone)">
• Transferring a current property into a Ltd company comes at a significant cost. If the value has increased you will be subject to capital gains & SDLT
• Transferring a current property into a Ltd company comes at a significant cost. If the value has increased you will be subject to capital gains & SDLT
Other comments: https://abs.twimg.com/emoji/v2/... draggable="false" alt="🙋🏾♂️" title="Happy man raising one hand (medium dark skin tone)" aria-label="Emoji: Happy man raising one hand (medium dark skin tone)">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🙋🏾♂️" title="Happy man raising one hand (medium dark skin tone)" aria-label="Emoji: Happy man raising one hand (medium dark skin tone)">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🙋🏾♂️" title="Happy man raising one hand (medium dark skin tone)" aria-label="Emoji: Happy man raising one hand (medium dark skin tone)">
There are many ways to extract funds from a Ltd Company via:https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤑" title="Money-mouth face" aria-label="Emoji: Money-mouth face">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤑" title="Money-mouth face" aria-label="Emoji: Money-mouth face">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤑" title="Money-mouth face" aria-label="Emoji: Money-mouth face">
1. Directors Loans
2. Salary
3. Dividends - 2% tax rate annually
4. Pensions - these are tax deductible and you can send them to a SIPP to be accessed at 55.https://abs.twimg.com/emoji/v2/... draggable="false" alt="👴🏾" title="Older man (medium dark skin tone)" aria-label="Emoji: Older man (medium dark skin tone)">
There are many ways to extract funds from a Ltd Company via:
1. Directors Loans
2. Salary
3. Dividends - 2% tax rate annually
4. Pensions - these are tax deductible and you can send them to a SIPP to be accessed at 55.
1. Refurbishment costs
2. Legals
3. Lettings agency costs
4. Cleaners
5. Travel costs 0.45p per mile if you’re properties are far away
6. Furnishings
7. All landlord safety check certificates
All in all depending on your strategy if you’re looking to invest in rentals 4 the long term & want to start building generational wealth, a Ltd co looks like the best option. However, you need to be clear on your strategy. https://abs.twimg.com/emoji/v2/... draggable="false" alt="📝" title="Memo" aria-label="Emoji: Memo">https://abs.twimg.com/emoji/v2/... draggable="false" alt="📝" title="Memo" aria-label="Emoji: Memo">https://abs.twimg.com/emoji/v2/... draggable="false" alt="📝" title="Memo" aria-label="Emoji: Memo">
Another thing to mention is that it seems like setting up the Ltd co before you get a buy-to-let will save you ££££’s
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔑" title="Key" aria-label="Emoji: Key">Key point also: Due to tax reasons it may be best to have separate Ltd companies if you’re flipping properties as well as a rental portfolio (seek advice).
Love, light & prosperity.
#property
