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  • Tax

    Buy to let Mortgage Limited Company

    Good morning house

    Appreciate this must have been discussed several times here, but I will appreciate guidance before meeting my accountant next two weeks.

    I currently have a trading company (IT) and have built some cash that could enable me to commence my BTL Purchase. The idea is to take buy one property every six months or thereabout using the money in the Trading Co. I need guidance to determine which of the strategy below is most appropriate tax-wise and the from the lenders perspective.

    Option 1. Form a new separate Company B purposely for house buying and letting with myself as the sole director and then loan money from company A (IT) structured in the form of directors’ loan at any rate someone said 0% is even possible? My understanding is that Directors Loan needs to be repaid within nine months. Is there any way to structure it for a longer-term period? Bear in mind I intend to loan money every 6 months from Company A for purchase, Is this a feasible option and will HMRC and the lenders be happy with this.

    Option 2. Form a company B and then make Company A shareholder in Company B. I understand the approach does not incur any interest or loan repayment, am not too clear on how it works though 

    Appreciate this might be long and boring email, I’ll be very obliged if I could be guided, please.

    Many thanks,

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    This thread is our "go to" one on this topic:

    Resources for reducing landlord tax liability

    Hope that helps for starters?

    P.S.  The moderator has deleted your duplicate thread as it is against our T & C's to duplicate topics because it causes confusion.

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    You will want to talk to a Mortgage Adviser as well as rightly discussing structure plans with your accountant.

    The problem with Option 2, is that not many lenders are happy with the company being the shareholder. Most require the borrower to be the shareholder of the company. This may limit your access to finance in the future.

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    _________________________________________________________________________


    My posts are not financial advice, just a rambling guy passing time on a coffee break.
    The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance.

    _________________________________________________________________________


    Out of interest why are you using a company to buy Investment property

    I think I know the answer it will be to avoid S24

    I fully understand your logic but take a lot of advice before you commit to this

    Its nowhere near as tax efficient as personal ownership

    Fees can be high to buy property? And taxes can be high as you extract your profits at some point




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    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.


    Thanks for your response.

    I opted for limited route basically as the intention is to build a portfolio in a couple of years. I am currently on the higher tax band with my contracting co.


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    I can fully understand where your coming from

    a Ltd co could be the biggest mistake you have ever make

    Just setting up a mortgage is costly with fees

    You will not get any CGT allowance when or If you sell

    Taking dividends is not as cost effective as it once was and taking a salary is costly to set up and you will pay Tax and NI and employer NI

    Accountancy fees are more costly

    Tread with great care






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    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.


    > Taking dividends is not as cost effective as it once

    But it is still more cost effective than paying NI

    > taking a salary is costly to set up and you will pay Tax and NI and employer NI

    Nonsense! My account charges me around £200 a year for salary. Are you saying that £200 a year is a 'costly' figure in relation to running a business?

    > Accountancy fees are more costly

    Agreed. But the OP said he plans to buy 1 every 6 months (although he didn't say how many he plans to buy in total), so if you spread this cost over the number of properties in his [eventual] portfolio I'm sure the costs are quite reasonable. Mine currently works out about £110 (inc VAT) for each flat in my portfolio

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    Ok if I am taking nonesence

    I ask you this simple question

    If I was investing in my own name would I have the same costs

    and would I pay NI

    I think the simple answer is No

    If you invest in your own name you dont need an accountant

    its much more costly to run a Company and its not as tax efficient its only S24 which is the driver to use a Company

    and thats the point  I am making


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    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.


    > If I was investing in my own name would I have the same costs

    Its hard to compare as they are different beasts. You have been doing the 'landlord shuffle' for quite some time now. Was your reason for doing this 100% down to succession planning?

    > its only S24 which is the driver to use a Company

    But that's simply not true. There are other factors to consider too.

    My situation is quite similar to the OP. I have an IT trade which I operate through a Ltd Co. I take out £12k salary a year, a few thousand in expenses and the rest (up to the higher rate tax band) in dividends. Up till a few years ago there was no extra tax to pay on the dividends. Recently, I've been taking £2k divi tax free and the other £30k ish i've been paying 7.5% (£2250)

    Now, running alongside this income stream I have net rental income of over £100k. If I held the property in my personal name I'd be paying 40% tax on this income. But running it through a Ltd Co I'm only paying £19k corporation tax. So for the past 15 years I've made this saving so that I could re-invest in the portfolio.

    15 years ago there wasn't a sniff of S24 but I simply did not want to run the portfolio in my personal name as I wanted to be in control of how much 'income' I would declare in any tax year. It's a very powerful took to be able to control how much income you wish to declare, and running a portfolio through a company allows me to do that

    Taking advantage of capital gains is not in my thought process as I dont plan to sell.

    Do you at least concede that aside from s24, there was other advantages of investing in a Ltd Co




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    If you use the limited company though you can transfer it tax free from one to the other? So instead of paying corporation tax, then dividend tax you have paid nothing so surely this way is more tax effiecient? Get point about cgt, but that's something I rarely get in ne an am not worried. Im looking to but first property soon in limited company. I remember you threat on the costs being higher, but in effect wont have paid any tax on the money im investing

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    Nothing wrong with useing a company as long as you know the downside

    Think of this for a moment

    Lets say I own a property worth 100k and it has a mortage of 25k I could if it is in my own name remortgage to 75% @£75000 and remove 50k to spend on any thing I want

    I could pay off my own home I could buy a car

    You cant do that with a Company Because you dont own the asset in your own name Its a Company asset

    You could take a directors loan from the Company but its not as easy

    BTL ownership is quite simple and cost effective Company Is not that easy

    The Major Plus I see with a Company is Succession planning and provision of a Directors Pension


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    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.