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I need a quick bit of advide on the most tax efficient way to hold my buy to let:
Our situation in brief is: I hold a 2 bedroom buy to let in a joint name with my father which we rent out, it's not under a company and so is just held as a personal asset.
We were led to believe that this is the most tax efficient way when you have just the one property and that it's not worth using a company to hold it.
We are coming to the point where we need to do a tax return for both of us, however my father is a 40% tax payer and I'm 20%. My question is- is it still efficient to hold the flat personally rather than under a company? Bearing in mind we want to keep the rent/profits in one pot and don't plan to take any out for personal use. (we currently have a joint bank account which it is paid into)
I know it's a pain to swtich a property to be held under a company after purchasing it, I'm just concerned as to whether we got the right advice in the first place.
Any help is much appreciated.
Hi Tom,You really need to seek professional tax advice, like that offered by our tax partner, Rental Income Tax Advisors. (FREEPHONE number on the banner at the top of this discussion).However, generally speaking, if your property does not have a mortgage on it, there is no advantage to holding it in a company structure.Even if it does have a mortgage on it, I still do not believe a company structure would assist you to any great degree to warrant doing it.Again, this is just my opinion, but I am not a tax advisor. Professional and personal advice should be sought as such specific advice is beyond the scope of this forum.We can only advise in general terms and point you in the direction of obtaining the best possible professional advice.
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
As Vanessa says, advice would be crucial before making any big decisions as to your next steps. A company is certainly a big step, and not a decision to be taken lightly, although for some landlords it can be an option worth exploring. The general attraction to companies at present is with regards mitigating the effects of the upcoming restrictions in finance costs. However, if there is no mortgage, then this will impact on the decision making process.
Where married couples own property, one avenue often considered is that of a Form 17 approach, however, given in your circumstances it is a property held with your father, then there is instead the possibility of a more simpler profit sharing agreement which may work well in your situation.
For any of your property tax needs, please do not hesitate to contact RITA via email or on Freephone 0800 1 22 33 57.
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
Thank you both for your reply.
I fully understand it's a case by case question which there isn't one answer for. In terms of the flat which is already owned with my father, that is being left as it is and not moved to a company. I was more referring to any more properties which we buy which will be through a company (advised by a tax consultant), but I was just wondering if that would still count as a second property as it's the first in the company? Hopefully I'm making sense!
I own property in my own name
and when I set up the company to buy more property I had to pay the higher rate stamp duty ???
If you have head room in your own name and you are a basic rate tax payer you could maybe still purchase in your own name if you are using a mortgage
If you are going into the higher tax bracket you may need to use a company
I think when you first purchased your FTB at the time it prob was good advice to do it in your own name
You need advice before you move but either way you will pay higher rate stamp duty
Learn Change and Adapt ?????
If you plan to keep the profits for further investment then a company may well be the best way to go.
However companies pay the extra SDLT on every property they buy.
Thanks for all the advice, very helpful.