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  • Tax

    Paying less tax in a company (part 1)

    Doesn't his salary payment have to be deducted from the company  books as an expense before the corporation tax is applied?
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    No. His salary is from another job which is nothing to do with his rental business.
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    I should have clarified this point. Please accept my abject apology.
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    Those who have incorporated such as DL have highlighted the significant increase in accountancy fees resulting from incorporation. I know some have said they do their own but I think the vast majority would use an accountant when incorporating especially when having another job.

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    I’d always recommend using a property specialist accountant when using a company. He also needs to be a portfolio landlord.  I pay £750 because I make his job easy for him. I’d advise anyone with a property portfolio to get clued up so you can make sure your accountant is not an unpaid tax collector. For a portfolio the size of this one I’d recommend an accountant anyway if in personal names.
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    Hi youngjoe,

    This is good reading and the calculations look correct.

    This covers a comparison between the tax position individually and in a company, but there are other factors to consider including:

    • The costs involved in changing a portfolio from being held individually including legal fees, mortgage fees, stamp duty and capital gains tax where applicable.
    • The additional accountancy costs incurred in running a company.
    • The potential negative impact of moving into a rental property should that ever be likely, in a company.
    • Whether you need to extract that income from the company and potentially pay company tax and income tax depending on how you plan to do this, and the level of income you require.
    • What the strategy of the individual is

    We are not in any way saying a company is “bad” as there are flip sides to all of the points made above, and a limited company is an option we consider for a landlord and have used multiple times. It just really emphasises the point made in the first paragraph which says “In certain circumstances” and the fact that some non-tax costs and considerations need to be looked at beyond a income tax Vs corporation tax comparison.

    Though we are interested to read part two!

    Kind regards,

    RITA4Rent

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk


    I dont think he is saying move your current properties into a company structure, I'm surprised that people are saying accountancy fees have increased, I have created a SPV now and my accountant hasn't changed the fees, so far anyway, that he was charging me for the accounts for my trading company and my personal taxation.
    So far useful information to give people something to think about
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    Slowly working towards financial freedom