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  • Tax

    Should I go down the Limited Company route?

    Should I start a Limited Company for buying property? I currently have 4 under my own name.

    Advice given to me has argued not to for the following reasons :

    1) if you have a ltd company it’ll cost you 40% for the whole lot not just the bit you go over. 20% corporation tax the 20% for pulling it out

    2) If you take the money you are drawing it you must pay tax on it

    3) people do it Because loads of people have no idea how tax works and maybe have investors or other parties involved 

    4) 20% corporation tax and 20% dividend would leave you better than 40% tax plus NI to be fair. But you'd pay 40% regardless 

    5) Others maybe got investors and other parties involved

    6) By time add in company fees, more strict accounts. Potential for investigation prob shell out more money than just saving your NI

    Can anyone contradict this?
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    Hi Andy,

    If you are a lower rate tax payer, there is little point in going the ltd. company route imho.

    See this thread as it gives a good understanding/overview of the topic:

    The BIG tax issue: Should I incorporate?

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    Firstly, there’s no 20% dividends rate - it’s 7.5% then 32.5% I believe. Being pedantic, corporation tax isn’t 20% either. So your rates are wrong, plus yes there’s loads of benefits you’ve not mentioned. All depends on you situation - speak to an accountant Wink
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    > Advice given to me 

    Who has given you this advice as it is full of holes!

    > if you have a ltd company it’ll cost you 40% for the whole lot not just the bit you go over. 20% corporation tax the 20% for pulling it out

    CT is 19% reducing to 17% next year. The other 20% will be dependent on how you take your money out, how much you want to take out, and what other income you have.

    > If you take the money you are drawing it you must pay tax on it

    Kinda true. But once again depends on the same 3 things mentioned above

    > people do it Because loads of people have no idea how tax works and maybe have investors or other parties involved 

    That's why you should speak to a qualified tax advisor and/or an accountant

    > 20% corporation tax and 20% dividend would leave you better than 40% tax plus NI to be fair. But you'd pay 40% regardless

    Already mentioned completely false. CT is 19% (reducing to 17%) dividend is either 7.5% or 32.5%. So in short , NO YOU WONT PAY 40%

    > Others maybe got investors and other parties involved

    What does this actually mean?

    > By time add in company fees, more strict accounts. Potential for investigation prob shell out more money than just saving your NI

    Company fees are not actually that high, and if spread out over the portfolio will be am minor and TAX DEDUCTIBLE expense. More strict accounts? do you mean you need to act professionally as this is a good thing to aspire to! There is no more chance of being investigated in a Ltd Co as if you owned personally. I've been a landlord for over 20 years and I have had zero investigations into my company. I actually got investigated for my personal BTL for the 1st time this year!


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    The reason that I don’t buy my properties through a company is because the lending costs are double.
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    Do you have any examples of this?

    I'm currently getting 5 year fixed rate mortgages for 3.49% with a 1% product fee (75% LTV)

    Best I can get in personal name is around 2.35%, so curious which lender is offering 1.75% as its a great deal and I might use them

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    Virgin is 1.9% for a 2 year fixed, the mortgage works is 2.3% for a 5 year fixed, Skipton is 1.75% for a 5 year fixed.
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    Hi Andy 

    There are many pros and cons to incorporating. It depends on your circumstances and what your end goal is in mind. 

    Irrespective of the above % being wrong, if you chose something that is not right for you it may cost you a lot more than you imagine .

    I would speak to a number of specialist people and then you decide on what is best for you. 

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    If you intend to buy properties which need work, you can offset the VAT. Having just gone through a large personal refurbishment (again!) the VAT paid was horrendous.
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    Are you sure Lou?

    Vat can be zero rated when you create a new home but not when you spruce up an old one (unless it’s not been used in ages).
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    What has VAT got to do with Incorporation ?

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