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  • Tax

    Property as a Sole Trader or Limited Company?

    Hi there,

    I am a new to property and currently I am self-employed.

    However, I am thinking of setting a limited company as the long-term plan is to have a property portfolio.

    For tax reasons, I think it is best to commit to setting a limited company, right?

    Is there any resources or reading to help better my knowledge in this area?

    Many thanks

    AB

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    Hi there,

    I made a post on tax subjects a couple of days ago, and  only had one reply, so I decided to ring three different property tax specialists..  it turns out most of them will give half an hour of free advice on the phone.

    What I undersood was that even though companies are taxed at a slightly lesser rate, and are able to run up more items as tax deductable expenses, the costs of managing the company are quite high and may negate win on this. Apparently you would also have to pay yourself 'dividends' when you make a withdrawal and this involves a lot of accounting and paper work, which is also expensive.

    I was advised by one accountant that it wouldn't be worth setting up a company unless you thought you were on top be above the 40% tax band, the other said if you had 50-100 properties, rather than just 10.

    Mine are not on a high rental, so I was happy with that, but I'm sure you can just give a local tax specialist a call.


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    It is certainly not worth using a company if you will stay a basic rate taxpayer, but it may well be if you are likely to become a higher rate one even if you only have a few properties.

    Costs of managing a company are not high. Paying dividends is optional but not difficult. There are other ways to take money out. Which is best depends on your plans and situation.

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    Why, in our option, incorporation is the worst and most expensive mistake landlords will ever make.

    Why BTL incorporation is an expensive mistake

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    Tony Gimple

    Founding Director

    Less Tax For Landlords


    If you plan to build your portfolio instead of extracting the cash ltd co maybe the better option than doing as an individual.

    A ltd co is a business and keeping the money in the business is an option.  However as an individual you have no option but to take all the income and as such it is then taxed.

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    Hi Aisha and welcome.

    The answer to this will be highly personal to you and you should seek professional advice from a reputable tax advisor.

    We have a thread that may give you some further insights as it curates all the discussions around this topic:

    What is Section 24 for landlords?

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