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Correct I have gifted deposits to my company and at some point I will start takeing the cash back
but it’s a limited strategy when the loan is paid back the. Income stops
I much prefer a SIPP. It’s a great way of taking out profits and it can be ringfenced for future generations
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.
The income doesn't stop on interest as the loan is never paid down.
If you are simply repaying a director's loan that's taking back what you lent with no profit extracted, and no tax advantage.
I took advice on that one and my account put me off
I much prefer a SiPP and claim exspencives and pay my wife a salary and a pension
As a BRT interest is more tax efficient for me than a SIPP and I receive the income now. The situation changes as income increases and I'm sure for a HRT there would be little if any gain.
This highlights the importance of receiving qualified tax advice on the pros and cons of incorporation. There is no one size fits all and what works for one individual may not be suitable for another.
However, interest is still another way to extract profits from a company that may be tax efficient for some.
You should also pay yourself a salary of about £8K (so reduce the amount of interest you receive) so that you get credits for your state pension (unless you already have full pension rights or another PAYE job).
How do you get £17.5K tax free? I'm guessing personal tax allowance and rent-a-room?
I've no need to make any further contributions to the state pension, I've already paid enough, but its a good point.
The £17.5k is the Personal Allowance plus the Starting Rate For Savings. That's already a liveable income for me but I'm awaiting confirmation that I can still use the Rent a Room exemption in addition to this. Dividend income can be taken in addition, although this is taxable.
We wouldn't be taking out any profits though - all would be reinvested either way. So it's a case of reinvesting 81% of the profits after corp tax or 55% after personal tax.
The ability to roll up profits into further investment over a long period (20-30 years) at a lower tax rate (ie: 19% corp tax v 45% personal) is where the benefit comes.
Btw, I'm not talking ltd company v personal in a general context - this is specific to our circumstances (tax rates, length of investment and so on).
So if you don’t want an income at some point why are you doing it
it’s nice to have the good things in life that’s why I do it
and I just pick anything that makes good money as tax efficient as I can make it
Eventually, yes. But we're talking many years down the road.
Strange I was talking to my tax advisor who is also a landlord last week and he said a number of landlord are useing the same plan as yourself
he could not quite understand it either
yes you will hopefully build a super nest egg in the company but crunch comes as you remove the profits
I wish you best of luck I know it was my intention to retire at 40 and I did I am 60 now and BTL has served me well but I can see it’s nowherey near as flexible if you invest via a company
but you have to do what you think fits your life