Trust Deed in favour of Limited Company for trading
I have read many articles on advantages of owning buy-to-let property & related mortgage(s) in personal names, and having a Trust Deed in favour of a limited company to divert rental profits to the Company (20% tax).
I am in the 40% tax bracket with my salary, and my wife is well within the 20% tax bracket.
We have one property – presently owned 90% by my wife and 10% by myself – rental profits are therefore divided 90/10.
We are wanting to purchase a few more buy-to-let properties – to keep long term for income and ultimately to boost pension income. All will be mortgaged.
Should we consider:
- buying in a limited company and mortgaging in the limited company. If so, is it difficult to obtain mortgages – and will we pay a premium interest rate compared to personal mortgages?
- buying in our own names and having mortgagers equally, and then enter into a Trust Deed with a limited company to divert rental profits to the company. If so, could we not draw dividends, and use all profits to merely reduce mortgages to zero for our retirement? . Obviously we would draw dividends when we retire, and then only pay 20% tax. Would the Trust Deeds need to be included on the Land Registry Title Deeds by the solicitor when the properties are registered in our names, or can this be done afterwards? Would any tax advisers/accountants be able to complete the annual property tax returns easily on this basis?
- continue to buy the extra properties on the present basis (90% – 10%) and not bother with the limited company and Trust Deeds? If so, would there be a potential problem with HMRC in any way for the split 90/10?
I am sure that there are many other individuals who have similar questions or have been in a similar position and possibly solved these matters, and I look forward to reading responses.
Many thanks
Bruce
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Member Since October 2015 - Comments: 3
3:16 PM, 31st October 2015, About 11 years ago
Would it work if you buy the BTL property under your personal name and then do the DoT the same day therefore there will be no CGT? Would this be picked up by Gaar?
Member Since January 2011 - Comments: 12217 - Articles: 1413
10:36 PM, 31st October 2015, About 11 years ago
Reply to the comment left by “Katie Ward” at “31/10/2015 – 15:16“:
Where would you get the money from to pay the mortgage if you did that?
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Member Since October 2015 - Comments: 3
2:46 PM, 1st November 2015, About 11 years ago
Reply to the comment left by “Mark Alexander” at “31/10/2015 – 22:36“:
Could you not use the rental income to pay for the mortgage? or am i missing something.
I thought you could buy the property under your name, make the limited company the beneficial owner and have the income under the company and pay the mortgage off using the rental income you receive. I’m interested to hear your thoughts
Member Since January 2011 - Comments: 12217 - Articles: 1413
5:21 PM, 1st November 2015, About 11 years ago
Reply to the comment left by “Katie Ward” at “01/11/2015 – 14:46“:
You could do that but the money you draw out of the company to pay the mortgage would be taxable.
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Member Since October 2015 - Comments: 3
5:33 PM, 1st November 2015, About 11 years ago
Reply to the comment left by “Mark Alexander” at “01/11/2015 – 17:21“:
I see. So i would have to move the property so that it is legally owned by the company in order to pay the mortgage using the rental income. Could I pay it from my own salary and keep the income under the company? Or would the lender not allow this. Thanks for your responses so far
Member Since January 2011 - Comments: 12217 - Articles: 1413
5:50 PM, 1st November 2015, About 11 years ago
Reply to the comment left by “Katie Ward” at “01/11/2015 – 17:33“:
Yes you could certainly do that as it is your mortgage.
You would have no rental income to offset 20% of your mortgage payments that way though so I fail to see that you would be benefiting.
You cannot offset your BTL mortgage interest against other income, only rental income.
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