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I agree with Tony about the "Landlord Shuffle" - selling what you own to your new Ltd Co
I have done it with a number of properties and I will still shuffle a few more in the next seven years
So why am I doing it?
My main reason is age and pension provision
The property I have been selling has been highly leveraged and had no capital growth Ie I don't pay CGT when its sold to the company and I am talking about low priced property below £80K so the stamp duty is manageable
The next question I have to ask is if S24 effects you is the Ltd Co route the way to move forward if you want to expand ?
I still believe it is the right way forward even with Income Tax NI and dividend tax
I think estate planning is easier with a Company but I could be wrong
What do others think? Is Tony Right or am I wrong?
There is no one size to fit all.
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Hi DL,I am slightly confused. In the video, Tony states he does not believe in incorporation. Sorry if I have misunderstood something ...
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
I confuse my self at times so I can understand why I am confusing you
We agree "one size does not fit all" and I think the Company route is really limited possibly limited to someone like myself of older years who wants a Large pension and is looking to pass on shares to younger members of the family etc
I am not convinced for younger landlords who hold property now to do the shuffle for the reasons Tony outlines
The question is for new Landlords or Landlords who are expanding and are affected by S24 , is the Company the right way to grow in the coming years ?
I'm happy to do the Shuffle up to the point where S24 has least little effect but If it had not been for it I would have stayed personal
It's whats best for the individual at the end of the day as always ...
Hello Vanessa, I had though that because the Ltd co BTL interest rates are 4.4% for a 75%LTV product, that takes away any of the s24 savings? Ran though the calculations with my accountant to check. How do your calculations come out, can you share?
I think your calculation are right But you have to think If interest rates rise to say 6% every intrest rate rise can make S24 effect worse
you may find the company works better with regard to tax
Many thanks for your reply.
Yes, the calc would be different at 6% interest.
I've got my own opinions about interest rates (Generally we're following Japanese model from 20 years ago). Interest rates will run down to near zero. probably even negative eventually. QE and other things mean the time of high interest rates is over for our life time.
I agree i think it will be a long time before they reach 6%
You are correct. Company mortgages cost around 2 times those in personal names, add in extra arrangement and accountancy fees, additional long and complicated conveyancing and the company route makes no sense.
But it also depends on your level of borrowing compared to the rent you are getting.
Eg my mortgage interest payment on a flat that achieves £1,100 pcm is £230 pcm, with an arrangement fee of £1000. If this was in a company my mortgage interest payments would be £560 with an arrangement fee of £4000. Plus more expensive conveyancing and double my accountancy fees.
Personal is also better when I sell as I will have a tax free allowance of around £25k before paying any CGT, whereas is company I will have to pay 20% on all gain.
> my mortgage interest payment on a flat that achieves £1,100 pcm is £230 pcm, with an arrangement fee of £1000. If this was in a company my mortgage interest payments would be £560 with an arrangement fee of £4000. Plus more expensive conveyancing and double my accountancy fees.
Do you have an example of this? Which (Ltd Co) lender are you using for comparison? and what is the LTV?
The Ltd co lender is Vida, arrangement fee 2%, interest rate 3.6%. The only point in going ltd is that lenders don’t do the affordability calculation on 5.5%, so you get the full 75% LTV even if the rent falls short.
This is a real live example because I did rush into buying a flat in ltd co and have an identical one in personal through Virgin Money, and my numbers are as above.
Still, I think there is merit in going ltd co if you have a big enough portfolio, I would say over 10 properties, maybe more.
If the interest rate is 3.6% (which I assume is a 5 year fix based on the rates I'm getting) then it looks like you're borrow approx £186k
Based on this borrowing, and your mortgage payment of £230, then the rate in your personal name is approx 1.49%, correct?
Are you trying to compare a 2 year fix with a 5 year fix? Or are these the rates your being offered on a like for like basis?