Running my HMO through my own Management Company

by Readers Question

9:08 AM, 26th August 2014
About 4 years ago

Running my HMO through my own Management Company

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Running my HMO through my own Management Company

What are the advantages/disadvantages of running my HMO expenses and income through my own Limited Company? Running my HMO through my own Management 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



Comments

Mark Alexander

9:13 AM, 26th August 2014
About 4 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 >>> http://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.
.

Leilani Lea

12:07 PM, 26th August 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "26/08/2014 - 09:13":

Thank you!!!

Colin McNulty

9:42 AM, 31st August 2014
About 4 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.


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