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Most of us are aware of the new tax on property rentals for landlords who's portfolio is not in a limited company, A letting agent that I sometimes used asked me if I had come across the following way of reducing tax. I am fortunate in that the majority of my properties are within a limited company, more luck than planning!
Anyone any thoughts on this? Not something that is of interest to me but would like to understand it.
Tax free dividend up to £5,000
Stopped reading after seeing this, if they can't keep up with changes then what else have they got wrong??
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Agreed although how many websites out there are not kept up to date?
This sort of thing as been around for some time
I have taken the time to talk to a number of Tax Consultants and all said it will not work for one reason or another
The only way if you have property and you want it in a Ltd Co is to go through a full sale and purchase will all of the costs
I may be wrong of course but until an advisor gives me a copper bottomed assurance with the back up of there money if it goes wrong I would not touch this
with a barge pole
and I haven't seen an advisor offering to pay if it goes wrong
Learn Change and Adapt ?????
Incorporation relief is available in some circumstances, which postpones the payment of CGT.
I can see many angles from which HMRC could pick such a scheme apart
One of them would likely work
Transferring your property portfolio into a limited company simply to offset the S24 reduction in mortgage interest relief rules has many disadvantages which can be summarised thus: -
· Liability to capital gains tax and stamp duty if you can’t prove your entitlement to S162 incorporation relief (you must be working 19-hours a week or more in the business or pull the wool over HMRC’s eyes via a temporary LLP).
· Upfront remortgage costs such as early redemption charges, brokers fees, lenders fees, and legal fees.
· Most lenders won’t lend to limited companies, and none are keen on so called ‘beneficial interest company trusts’ as they fundamentally weaken their ability to pursue the debt.
· Significantly reduced choice of lenders and higher interest rates.
· Lenders will mostly require a personal guarantee (if the company goes bust you remain responsible for the debt).
· Lenders will take a debenture (legal charge) over the company’s balance sheet, which restricts your ability to make best use of your director’s loan account if at all.
· You’re tied in to the first lender and their appetite for further lending if any, meaning that each new acquisition or remortgage may need a new lender and a new company.
· A limited company is fully visible to HMRC and subject to corporation tax, dividend tax, income tax, and national insurance.
· It’s almost impossible to mitigate inheritance tax (40%) without expensive (at every stage) and ultimately uncertain ‘opinion-based’ trusts, meaning that your heirs may have to break up your hard work just to pay the tax bill.
I think More lenders will come to the table as we move forward
We have a lot more options today than we had 18 months ago
The market will change and so will lenders just give it time
I think the choice for old landlords is maybe use both personal and Ltd Co
But I do take your point on taxation if you invest via a company and you are a higher rate tax payer you will pay up to 60% when you with draw profits one way or another
Easy to manage
Just create a company for each property.
Have different lenders per property.
But yes companies are for many Hobson's choice
S24 make BTL unviable unless you can reduce gearing massively
So they have to go corporate