Buying a buy to let through a limited company

by Readers Question

3 years ago

Buying a buy to let through a limited company

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Buying a buy to let through a limited company

In the light of recent budget changes, until we see any response from government with respect to concessions they may make to individuals purchasing buy to let in their own names, buying through a limited company now seems to the sensible way to proceed with new investments. limited company

This thread is for tips and questions regarding incorporating and finding finance for buy to lets via a limited company.

James



Comments

Neil Patterson

3 years ago

In the right circumstances this is definitely going to be a way forward for many investors.

If anyone needs specific professional assistance we have some useful contacts on our
Finance Tab and Tax tab at the top of the page.

Mandy Thomson

3 years ago

One reason I haven't incorporated is because it's even harder to get a mortgage. However, I'm assuming and would hope that lenders will be rethinking this following the summer budget announcement.

David Price

3 years ago

Beware of acting too hastily, the Government may change the rules on company purchases. Already there is the 'Envelope' tax which could well be imposed on all properties (currently only for properties worth over one million, soon to be reduced to half a million). Who knows what ploy may be used to penalise landlords and of course indirectly tenants.

At one time I thought that the Government might reimpose the window tax, but it's already there by a different name, 'Energy Surcharge' on glass purchases - a nice little VAT earner. Why is there no energy surcharge on, for instance, steel or cement - even more energy consuming products?

Mark Alexander

3 years ago

I have no doubt that if the Finance Bill receives Royal Assent without amendment that geared investment property purchases will occur in companies. However, the campaign in regards to the proposed finance cost restrictions on individual landlords, especially now The Telegraph has joined forces with us, seems to be gaining pace. The Budget proposals are far from a done deal yet.

Also see >>> http://www.property118.com/tax-efficient-incorporation-landlords/77519/
.

John Walker

3 years ago

Reply to the comment left by "Mark Alexander" at "24/08/2015 - 13:07":

Hi Mark,
I haven't noticed any comment from you regarding your recent meeting with Treasury officials and the consequences of proposed budget changes to the way landlords' finances are to be assessed.

John

Mark Alexander

3 years ago

Reply to the comment left by "John Walker" at "24/08/2015 - 14:08":

Hi John

There have been several, here's a link to the comment I posted within minutes of leaving the meeting >>> http://www.property118.com/consultation-budget-landlords-2015/77343/comment-page-6/#comment-62805
.

N S

3 years ago

I think I'm being thick here - but noting the changes in the dividend tax I can't work out how it's better to sit in a company? ie I get that you pay the lower tax of 20% and get your full interest rate deduction - but if you take money out don't you end up paying higher tax as well (ie if you're a high income earner)? So doesn't that mean you end up paying the 20% plus then 40% or 45%? Maths is not my strong point....

Mark Alexander

3 years ago

Reply to the comment left by "N S" at "25/08/2015 - 09:01":

If you plan to withdraw all of the profit in the year you make the profit then the advantages are slim at best.

However, if you plan to reinvest the profit or use it to pay down your mortgages then it makes a lot of sense to pay the lower rate of tax on the retained profits.
.

Reply to the comment left by "N S" at "25/08/2015 - 09:01":

It really depends on your personal circumstances. I have looked at my figures using two online calculators. One for my current business in 2020 (privately owned portfolio, <40% leverage), and the second after incorporation assuming 100% profit taken out as dividends annually. I also assumed a 1% rise in interest rates. As a private LL I will be taxed 88%. As a Ltd the total tax deductions (including corporate) will be 27.5% - less that 1/3!.

David Price

3 years ago

Reply to the comment left by "Dr Monty Drawbridge " at "25/08/2015 - 13:39":

Note to self. Must do something about the low tax on property held in Limited Companies, perhaps extend the Envelope tax down to £100k or a special rate of turnover tax on property companies. Must give the unintended consequences no consideration at all. George O

PS still considering re-introducing the window tax for rented properties, excluding of course social housing providers.

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