I am a higher rate tax payer and I want to expand my property portfolio further. I want to shelter the rental income from my income tax bracket as I wish to re-invest the money into buying more property. I do not need to draw money from the business.
I have read extensively and considering my long term goals, using a Ltd company seems to be the best fit. However, in the current climate, lenders seem to have very low LTV products e.g. deposits required equal 35-45%, which is counter productive to growing a portfolio.
I have read that you can buy the properties as personal BTL mortgages with deposits of 25% and then create a deed of trust to the Ltd Company and benefit from corporate rates on income. However, it’s very hard to be sure this is in reality a workable option as I have many questions where the answers are not very forthcoming.
If anybody actually has any real life experience with this approach, I would really appreciate your help on these questions below:
- Do you have to tell the mortgage company you are going to put the property into deed of trust to a Ltd company when applying for the mortgage?
- Do mortgage companies accept this method to managing your portfolio?
- If you do the deed of trust at the same time as you purchase the property, does this avoid any CGT issues since there would be no gain from when you personally bought the property (no change in Market Value price)
- Does the deposit you put into the property become a ‘directors loan’ too?
- How easy is it to re-mortgage the property when you need to re-finance the property?
- Is there anything specifically that needs to be included in the deed of trust to ensure the income is regarded as that of the business?
Any other comments?
I really would like the advice of somebody who has actually done it or is doing it now as I don’t think everybody really understands the value of a limited company to some investors, especially when they are exposed to super high tax rates above the 40% bracket.