Running my HMO through my own Management Company
9:08 AM, 26th August 2014, 12 years ago
3
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What are the advantages/disadvantages of running my HMO expenses and income through my own Limited Company?
The properties would be bought and kept in my own name.
Rent-to-Rent properties are handled through the Company, but should my owned properties be too?
What if I live in one of my HMO’s (to avoid capital gains tax) how does this affect it?
Can I provide AST’s through the company if I am the Owner?
Would love your views and knowledge.
Thank you!
Lily
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Member Since January 2011 - Comments: 12194 - Articles: 1396
9:13 AM, 26th August 2014, About 12 years ago
Hi Lily
That’s a lot of questions!
Presumably you are considering tax planning opportunities? If that’s the case then a lot more information would be required and I recommend that you talk to an accountant – here’s a link to mine >>> https://www.property118.com/member/?id=452
With regards to your question re AST’s, yes of course you can provide them through the company. That would be no different to what any other property management company would do for you if you were to contract out the management to a third party.
.
Member Since November 2013 - Comments: 1
12:07 PM, 26th August 2014, About 12 years ago
Reply to the comment left by “Mark Alexander” at “26/08/2014 – 09:13“:
Thank you!!!
Member Since August 2013 - Comments: 161
9:42 AM, 31st August 2014, About 12 years ago
IANAA but as I understand it, the key seems to be your personal tax situation.
If you rent out personally, then the HMO rental income must be declared on your self assessment, and you’ll pay tax appropriately. Now if you’ve got lots of personal losses (due to refurbs and mortgage interest accrued etc) then you may end up paying no tax at all, as the income tax is offset due to the losses.
But if you don’t have losses, and you have another job or a sizeable rental income, then you may end up paying higher rate personal income tax at 40% say.
Now if you run it through your company, you will pay corporation tax at 20% on the profit (assuming you’ve got no loses and you’ve made a profit).
So it comes down to a tipping point where if you’re starting off and making losses, then it’s probably better to take the rent personally and pay no / less tax. But if you’re more established, it probably makes sense to run it though the company and retain profits in the company for future use / investments / pension provision etc.
Note all of the above is complicated by things like: how much of your refurbs are classed as capital expenses vs revenue expenses; what other income streams you have; what other income streams your company has; what the share structure of your company is (hubby and/or kids and/or other partners as shareholders?); whether you need to show an income for future mortgages etc etc.
In essence this is a complicated subject and you should take proper accountant’s advice that’s based on your personal circumstances.