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just looking for a bit of a nudge in the right direction. I’ve been a small time landlord, half in my name, half joint between me and my wife, for a number of years and we have always done our own self assessments. Fairly aware of S24 but no expert and pretty sure we’re not tax efficient.
I am looking to grow a portfolio, it’s very cheap here in Liverpool. I was all set to start an ltd spv but after promising myself that I’d get better educated this year and reading up on here, I’m now unsure of what to do, other than a review of my modest holdings now seems wise.
I am a 40% tax payer and my wife earns around the tax free allowance.
Any advice is much appreciated
I've a modest portfolio in and around Liverpool. Majority of my properties are in my name and BP name.
I have now set up a Ltd Company and I am going through the process with my tax consultant to migrate my properties into the Ltd Company as it's much more tax efficient.
Are you based in Liverpool?
Hi Richard, I am indeed sir. Prescot. Am I right in thinking that you’re aiming for growth and don’t need to release money with that strategy? Money to live off I should say as I presume under a ltd it’s OK to say release equity for another BTL
Good morning James.
I know Prescott well, I am originally from Huyton so a few miles up the road.
My current solution is to migrate our properties under a limited company benefiting from the tax relief. There are also other benefits, as explained by my tax consultant .
I am also in the middle of moving to a new lender for the majority of our portfolio.
At that point yes we are in a position to refinance and add further B2L.
If you would like further info or grab a coffee just let me know mate.
Much of this will depend on your goals (typically yield v capital growth) and your other income. I suspect given you are looking in and around Liverpool that yield is key and as you said you are a higher rate tax payer suffering s24. Given the s24 is already going to hit you I would suggest you review your existing portfolio and see if you can unlock some tax free cash as well as reduce the tax burden going forward.
We have been doing this for a number of clients. The key to viability is to look at the whole portfolio. Sometimes its simple changes around allocation of income and sometimes its more complex restructuring of existing portfolios with growth capital.
Give me a call if you wish to discuss.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
I can see your issues
the main problem I see with a company strategy is apart from costing you more to run
extracting the cash to spend is not very tax efficient
you will pay so much tax if your s 40% tax payer
the company is a good wrapper for growth
but it’s a bugger getting out money especially if your effected by s24 which I think is the main reasons for you looking at a company
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 Richard and J. Really appreciate your advice and offers for help most kind. I'll have a think today and will likely give you a shout. Ive got to get organised this year but for now, my Mrs is due with baby number three on Monday so no doubt plans will be on hold for two weeks shortly, but honestly thank you
Thanks DL. This is it. It's a hard choice isn't it. Be more tax efficient, likely increase the opportunity to grow my portfolio but have limited access to money if I need it, or have my wife buy future BTLs (she's fine with this btw were a good team), maybe pay more tax up front but able to use the profits how we see fit be it more BTL or the occasional holiday or what have you.
I don't know if it makes a difference but I'm 39 and she's 34 so my gut is telling me that I need to focus on growth so a ltd could be good for us, as we don't need the money now and my long term goal would just to feel like I had some freedom over how long I stay working, although I've probably got 20 years left that I'm happy to do so I suppose it would be nice to have a reasonable portfolio by then.
Also not sure of it would effect your advice but yields are great in Liverpool. Capital growth however I don't think it's unfair to say that's minimal a lot of the time. Sorry I'm just thinking out loud and very greatful for your thoughts
The true fact is they have you which ever way you jump
company great for growth but again they will clobber you when you sell there is no cgt allowance in a company
so when you sell company pays Corp tax at 19% which is good
but then what how do you get the profits into your pocket
if your a basic rate tax payer is ok but if your a 40% tax payer it’s a lot of tax and your effort and risk it just taxed so high is it really worth the effort
it’s the higher rate tax that becomes the problem this is precisely why I invest in pensions
it’s not really what I want to do but it makes so much sense
your nearly half my age so I can fully understand why pensions would not be your first choice
Thanks DL, I do appreciate it. So it sounds then like perhaps like so many things in life, because there are pro's and cons, one might be best to just have both if they're able? Is that what you've done do you mind I ask?
Am I correct in thinking an spv is a legitimate way to avoid CGT if I died and left all of this to my three children? I think in the event of my death the CGT would be payable straight away depending on how I'd setup my will.... (something else that needs sorting in 2019!)
Btw is the site running slow for any of you? It might just be me