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  • Buy-to-Let

    Moving property to limited co

    I was hoping to get some advice on whether it makes sense to move a property I have in London to a limited co. I am making far less than before given S24 and thinking of either selling or moving it into the limit co (I have one there already).

    My situation is that I am a higher tax payer, plan on keeping th property long term and possibly adding more properties to my portfolio (currently only have th 2 investment properties).

    My only hesitation is the amount of capital gains tax I will have to pay as I believe it is going to be 28%.

    My understanding is that I will not need to pay stamp duty as the property is worth under £250k. 

    The details of the property relating to how much tax I currently pay is below:

    Gross income                                                     £1,125
    Deduct: Service charge                                  (    240)
     
    Taxable income                                                 £   885
     
    Tax payable @ 40%                                          £   354
     
    Deduct:
    Mortgage interest £346 @ 20%                  (     69)
     
    Actual tax payable                                           £   285
     
     
    The net disposable rental income, ie what I have left



     would be as follows:
     
    Gross income                                                     £1,125
    Deduct:
     
    Service charge                   £240
    Interest                                £346
    Tax                                         £285
     
                                                                                    (   871)
     
    Net disposable income                                  £  254
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    Tax treatment of limited companies is very different to self assessment of an individual. Given that you are a higher rate tax payer - it MAY be beneficial to put it into a company, however it really depends on what you want to do with the rental income.

    In general the best benefits of using a limited company is if you are planning to retain the rental profits inside the company and use them to grow the portfolio. But if you are planning to withdaw the money from company to live off, it may not be the best idea to incorporate.

    But the only person who can really answer your question is a qualified tax advisor and each individual case needs to be assessed on it's own merits.

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    Thanks JamieH, I will take your advice and chat with a tax advisor. My intension is to grow my portfolio over time though have to admit I am quite worried about the he BTL market at the moment
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    As Jamie said, this is unfortunately one of those rare questions that cannot be answered in any prescriptive way via a forum - you really need bespoke tax advice from a tax advisor who specialises in property tax.

    However, we do have this helpful thread which may assist your thinking:

    The BIG tax issue: Should I incorporate?

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    Hi Vanessa, thank you for your reply. I have had a look at the article and there are quite a few useful points made.
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