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  • New Members

    Newbie: Ltd Co vs Sole Trader ?

    Hi !

    I'm in the UK for 1 year and considering to start investing in BTL here now (please excuse my English!)

    I will be a Basic Rate tax payer and intend to invest around 200,000£

    I was running the numbers and it seems that it would be more interesting for me to start as a Sole Trader vs a Limited Company because of the higher Mortgage rates for Ltd Companies (2,50% vs 3,50% from what I recently had from a Broker).

    Would you agree with that statement ?

    Thank you in advance!

    -Marc

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    Hi Marc!

    In short, speak to an accountant before purchasing anything. I can recommend a specialist accountant if you need.

    Mortgage rates for ltd companies are generally higher as you say, but they are becoming more competitive as more investors are now purchasing through limited companies than previously. The main reason that more investors are purchasing through limited companies is because of something referred to as "section 24". In short, section 24 will wipe out your profits if you are a higher rate tax payer, as under section 24 mortgage interest payments are no longer a tax deductible expense (unless you have purchased through a limited company!).

    Please note - you have said you're a basic rate tax payer, but that may change once you purchase e.g. rental income may push you into the higher rate bracket.

    The above is an incredibly brief explanation of a complicated topic - and there is far far more to consider than section 24 when weighing up whether to incorporate or not. As I said at the start, basically, you must speak to an accountant Smile

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    Hi Marc,

    This is a FAQ on Property Tribes, and has been answered here:

    The BIG tax issue: Should I incorporate?

    As the previous poster recommended, it would be best to get bespoke tax advice as to your personal situation, as without indepth knowledge of that, any forum can only answer in generalisations.

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    Thank you for your answers !

    I did speak to an accountant be they are not specialized for the BTL business I'm afraid

    Would you have anyone to recommend ?

    Thank you!

    -Marc

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    Property Tribes partner for tax is Rental Income Tax Advisors and can be contacted by clicking the link I have supplied.  RITA specialises in landlord and property tax and are also the tax partner of the Residential Landlords Association, which I also recommend you join.  Property Tribes offers a 25% discount off membership to the RLA, which is also tax deductible!

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    Thank you Vanessa, very helpful !

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    As a basic rate taxpayer sole trader is the best route, but do you intend to remain a basic rate taxpayer?

    What are your long term goals? It sounds like you intend to leave the UK so maybe you would remain a basic rate payer in the UK, but you will need to find someone to manage your properties that you can trust.

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    Hi Peter Jackson !

    yes I intend to remain a Basic Tax payer as my BTL income should be the only ones I have here

    I'm in my forties and I look at property investment as a long term business, anywhere between 10 and 20 years at least

    The idea is to generate income first and then Capital and Portfolio Grow more slowly, on the medium and long term, doing some refurb and refinancing where it is possible

    I'm not sure what the future holds for us but we plan to stay here for the next 5 years at least if everything goes well

    The idea is to invest and have someone managing this for me, I have somebody already, and will probably meet more people down the road

    Thank you for taking the time to answer my questions

    -Marc

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