LTD company for small time landlord or stay a sole trader?

by Readers Question

11:26 AM, 3rd November 2016
About 3 years ago

LTD company for small time landlord or stay a sole trader?

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LTD company for small time landlord or stay a sole trader?

For obvious reasons most of the current S24 talk concentrates on higher bracket earners and/or highly leveraged landlords.plan A or B

I’m the typical small portfolio landlord on the edge of getting stung by S24 so I want to make sure my next few decisions are well informed. I imagine there’s many others in my position so I thought I’d address the community for some informal advice before I speak to a tax planner.

I’m a sole trader with a couple of London rental properties and a fluctuating income. My current rental numbers are:

£32,000 Gross rental Income
£9924 Mortgages+Expenses

I’m looking to buy another property so roughly an extra £18,000 in rental income and £6500 in mortgages. My personal income can range from £10,000 to £40,000 as a sole trader. I want to spend my rental income.

At this point should I – make further purchases in a LTD company? Move my sole trader work to a LTD company? One? Both? Neither?

Thanks

Stephen



Comments

Mark Alexander

14:23 PM, 7th November 2016
About 3 years ago

Reply to the comment left by "Chris H" at "07/11/2016 - 12:56":

Hi Chris

No problem running a company and a partnership in tandem or incorporating the partnership into the company at a later stage.

I think you will find this case study to be helpful https://www.property118.com/go-going-well/91877/
.

Chris H

14:50 PM, 7th November 2016
About 3 years ago

Thanks Neil, following your first link i determined as i am not married i should follow the linked page which states the following,

What if I am a sole trader?
Sole traders must pay SDLT on incorporation, which is often a major disincentive. However, there are a variety of cost effective ways to form a partnership with a spouse, another landlord or a family member without you needing to refinance or pay excessive amounts of stamp duty or CGT. For example, you could take on a partner who owns just a 1% stake in the beneficial interests of the business

To achieve this partnership with a friend is it a Declarations of Trust? If so is there a way I can understand the likely costs associated with Stamp Duty, CGT and professional fees to achieve such a partnership via this method?

Mark Alexander

15:09 PM, 7th November 2016
About 3 years ago

Reply to the comment left by "Chris H" at "07/11/2016 - 14:50":

That would very much depend on the number of properties, purchase price originally, value now and mortgages outstanding.
.

Chris H

16:01 PM, 7th November 2016
About 3 years ago

We are talking 3 properties, purchase prices a combined 1.225m, current combined value 1.8m with 0.92m mortgages outstanding.

Thanks

Mark Alexander

16:14 PM, 7th November 2016
About 3 years ago

Reply to the comment left by "Chris H" at "07/11/2016 - 16:01":

Legal cost for all three Declarations of Trust will be £750 plus VAT via Charles King at Cotswold Barristers - see https://www.property118.com/member/?id=3968 - he will also confirm the amount of SDLT payable.

GGT will be growth in value X 1% X either 18% or 28% - please seek tax advice as suggested by Neil.
.

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