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Slowly working towards financial freedom
For example if you were a basic rate taxpayer I would generally always advise you to stay in personal names.
As an incorporated basic rate tax payer I feel obliged to challenge that generalisation. As you have stated "Each person's circumstances are different"
A good teacher must know the rules; a good pupil, the exceptions.
Martin H. Fischer
That's why I said 'generally'. I didn't say I would always advise to stay in personal names. So not guilty of a generalisation. I am intrigued though to know why you have incorporated.
As it happens I recently created a post here:
You had a very complex set of circumstances. I would still maintain that for landlords with relatively straightforward circumstances, incorporation is generally not a good idea.
To substantiate my belief with a simplified version of my own circumstances I'll take an employee earning £20k with £200k to invest and exploring the options of giving up the day job. They have found a property for £200k with a net yield of £20k and question how to purchase it.
As an employee earning £20k, they are used to paying £1500 IT and £1364 NI, leaving £17,136 take home pay.
As a Sole Trader they will simply pay IT of £1500, leaving an income of £18,500.
If they incorporate and use the Savings Allowance and Starting Rate For Savings on a directors loan they can receive £18,500 free of IT or CT. They can also receive a further £2k free of IT. As there is only £20k available, the £1500 profit would be subject to £255 CT, leaving the director with an income of £19,745.
This wasn't my deciding factor. I wanted to share this investment with my daughter. If I had bought in our joint names this would have not only removed her FTB status, it would have had an adverse effect on her student loan and any future income benefits should she need them. By incorporating there is no adverse effect (at least on FTB and student loan, I've not checked benefits) and she can enjoy up to £2k pa tax free in dividends without the need for SA.
What really influenced me is that by paying down the directors loan from retained profits I can manipulate my net worth as I get older. I'm not overly concerned with IHT as my liability will be small but I've received qualified advise that I've probably done enough to avoid it (confirmation of this advice would have cost more and didn't seem essential). What I believe to be the greater threat is the loss of assets for care needs later in life which can be manipulated in a company format without falling foul of deprivation of assets legislation. Its far more difficult for assets owned directly.
My ultimate aim upon retiring is to hand directorship to my daughter and buy a lifetime lease from the company with the outstanding balance of the directors loan, but I'm not sure if this is actually possible/allowable. I'll take further advice as the time approaches and legislation becomes amended.
As an old Landlord who is a 40% tax payer
I know I just pay more tax than I would when I invest in my own name
Since Osborne changes
I see a Company structure as the only way forward and I try and take advantages of the Pluses
Sucsession Paying my wife 8k a year and Pension Planning of course
Buying more property is more costly than it was in my own name
and accoutancy and running costs are more
NO GGT allowance when you sell costs of running a pay roll
and there is also a the fact that the world can see what you own and your wealth is in display at the press of a button
I have nothing to hide But If I invest in my own name every tom dick and harry cant look at my accounts
BTL is now a Business Not an investment
Tom Dick and Harry cant look at my pension ISA or my BTL in my name which is ok with me
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.