Limited Company Tax Partnership Confused!?

Limited Company Tax Partnership Confused!?

8:42 AM, 18th November 2015, About 7 years ago 4

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I have a few queries which I need to iron out as I am receiving different advice all the time.confused

Earlier this year me and my brother decided to invest in the BTL market and now have 4 properties we jointly own. The issue we have now is whether to setup a limited company and put all our current property’s and future purchases under the Ltd company.

Reason for this is because I am basic rate tax payer(20%) and my brother is a higher rate tax payer at (40%) so from what I am aware we will be paying more tax due to my brothers higher rate of income tax.

I have been told that in order for a Ltd company to be beneficial we should first grow our portfolio to 6+ property to make it worthwhile? Also I have been told that trying to get a BTL mortgage with a ltd company can be more difficult?

Our current gross rental income is approx 30k per annum.

Any advice or any specialist property accountants that can be recommended would be very helpful.

Thanks guys



Neil Patterson View Profile

8:48 AM, 18th November 2015, About 7 years ago

Hi Ricky,

You need professional assistance on this as there are so many factors based on information you have not given that are all critical.

I have been trying to follow Mark's recent work on the tax issues post Summer budget, but the work has been so complex I just end up realising how much more there is to understand than I do already.

Our accountants Pacific are on the sharp end of this and I would 100% recommend you engage their assistance. Please see the introduction form at the bottom of our tax page >>

Alison King View Profile

16:19 PM, 18th November 2015, About 7 years ago

I have been wrestling with the same question for the past six months and am no closer to a resolution. Whilst I agree that it is a good idea to consult a specialist accountant, I also think it is important to gather as much information as possible beforehand in order to have the best possible discussion.
The problem I have found is that there are too many uncertainties at the current time. The changes to the tax regime that were announced in July were unexpected and could be extended to include companies. Similarly the Bank of England has gained "new powers", but we don't know what these are or how the Bank intends to use them.
With regard to your questions, it is becoming easier to get BTL mortgages as a company, but interest rates are higher. You can easily find information about these on the Internet.
I wonder where that "6 properties" figure came from; I think you need to ask what the reasoning was behind that. Is your business plan to expand your portfolio over the coming years or to pay off the loans and retire?
I have built two ten year plan spreadsheets with all the factors like number of properties, tax, interest rates, maintenance costs, rent increases etc included. One models the personal situation and one models the corporate one. This gives me some idea of the risks and projected differences between the corporate and personal model. But it still can't answer those unknown questions and therein lies the rub. I am waiting to find out if we get any more clues in the Autumn statement before I take any action.

denis knockton

10:36 AM, 19th November 2015, About 7 years ago


The best advice is to apply your figures on a spreadsheet and do a comparative analysis of personal vs limited company and remember to factor in a reasonable hike in interest rates. The limited company rates in general 1 - 1.5% higher than personal BTL rates but as more lenders come onto the market, it is expected that the margin may become smaller. As Alison says the July announcement was not expected and we do not know what else the government can spring upon us in the future. However, you can only act with the info. available today and as it stands it is better to buy your future properties under a company. It is argued by many property accountants and tax strategists that having a "hybrid portfolio" made up of personal and business mortgages is probably not a bad idea in terms of hedging. Putting your existing properties into a limited company has huge tax implications especially depending on the capital growth you may have to date, so I would approach that with caution. Seek professional advice and do your numbers. There is no one size fits all. Good luck.

Simon Lever - Chartered Accountant helping clients get the best returns from their properties View Profile

11:14 AM, 21st November 2015, About 7 years ago

Who has told you that 6+ properties is needed to make it worthwhile.

It surely depends on the quality of the properties and the rent v the interest you receive. There is a lot of difference between 6 2 up 2 down terraced houses and 6 3 bedroom semis!

One possible reason for the number is due to the Elisabeth Moyne Ramsey case where the number of properties was a factor in deciding there was a business for incorporation relief.

As quoted by some experts using this case for their clients:
"The size of the portfolio can be indicative of whether there is a business, however this is not definitive. In the Ramsay case five occupied properties was deemed sufficient which suggests that the activity and time involved in handling the occupancy may take precedence over the number of rental properties."

Collect all the information you can about the various properties and take professional advice.

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