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Thread: BTL Property advice

  1. #1
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    BTL Property advice

    Evening everyone,


    I am in the market for a buy to let property local to me, I have the deposit saved up and done all the usual re-search. I have family with a few BTL properties so I know approx yield etc etc.

    My main question is to buy as a personal mortgage or LTD co.
    I am planning on buying 2, possibly 3 properties this year and same year after year to build up quite a big portfolio.

    My accountant is saying LTD co for tax purposes however the mortgages are harder to obtain, more expensive and so on. On the other hand my mortgage broker is saying its much easier to get a personal one and go down that route.

    What are members on here doing, I am looking for an unbiased opinion as I can see both points above.
    Personal will save me some hassle and is cheaper but if I want to go LTD in the future it could then cause problems.


    Thanks

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    As a BTL owner and not a high flying property tycoon, my accountant and mortgage advisor both said to go private. Iím four years in and other than the odd few hiccups itís been all good so far. Good luck.


    Sent from my iPhone using Tapatalk

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    If you are a basic rate taxpayer benefits (tax) are less obvious. Higher rate taxpayer avoids the interest tax relief restriction and surplus taxed at lower rate.

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    Changes to the tax relief rules for mortgage interest on BTL (which are being phased in currently) mean that using a company is likely to be much preferable. Find a specialist mortgage broker.

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    I think unless you have a portfolio of 5+ rentals - you are best steering clear of LTD CO ownership.

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    It really depends on a number of factors and like said already, you need to take specialist advice.

    Your income is important, whether the rental income/s takes you into higher rate, whether you have a spouse and their income. This year 25% of the new rules are phased in so itís important to get it right.

    Most landlords though will not go limited as the extra set up costs, along with higher mortgage rates and ongoing accounts costs make it less viable (unless you live in London Iíd imagine).

    As said seeking advice is the only route as weíd need to know your full financial situation before saying whatís best.

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    Buy private but operate a Ltd co management co with your other hand.

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    Thanks, quite a mixed response again.
    This will be my first BTL but it will be on going which is why I am looking at a LTD co mortgage now however after speaking to a broker today there was very few lenders who could help based on my purchase price, deposit and so on. The ball was really in their court and fees (to be confirmed) were high.

    Personal was straight forward, I am just thinking later down the line it may not be? Unless I just stick to personal BTL mortgages. My aim is to have about 15-20 in total.

    One benefit of the LTD co mortgage was that I wont have to pay the second home stamp duty on the first property which will save me a couple of grand and writes off the initial high fees however I will be back in the same predicament on the next property in a few months time where I do have to pay the second property stamp duty but I am also hit with the higher fees and complicated mortgage.

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    Quote Originally Posted by MCFastybloke View Post
    Buy private but operate a Ltd co management co with your other hand.
    Now THAT makes a lot of sense!

  10. #10
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    Quote Originally Posted by MCFastybloke View Post
    Buy private but operate a Ltd co management co with your other hand.

    Sorry to sound a bit dim but how exactly would that work?

    I own two other LTD companies at the moment so I do know in general how business works.
    At the moment my income is split between PAYE and Dividends like most people.

    I should clear £250 profit per month from a BTL property.

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    Quote Originally Posted by GC2012 View Post
    One benefit of the LTD co mortgage was that I wont have to pay the second home stamp duty on the first property which will save me a couple of grand and writes off the initial high fees however I will be back in the same predicament on the next property in a few months time where I do have to pay the second property stamp duty but I am also hit with the higher fees and complicated mortgage.
    Are you sure about this?

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    Quote Originally Posted by draftsmann View Post
    Are you sure about this?
    I am sure this was confirmed but could be wrong??

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    Quote Originally Posted by MCFastybloke View Post
    Buy private but operate a Ltd co management co with your other hand.
    Thatís a very interesting idea. It wonít help on the tax relief issue on loan interest so given the OPís likely high level of borrowing it might not help him much.

    For a personal property portfolio with little or no debt it would allow some of the profit to be shifted into the company, taxable at the corporation tax rate which is obviously much lower than the higher and top personal rates and parked there. I think the key term here has to be ďsome of the profitĒ as in my view (and Iíve had a fair amount of involvement in tax planning involving splitting of revenues between different entities) the fees charged by the management company should be reasonable and in line with independent companies providing similar services. In other words it would be unduly aggressive to shift all or the bulk of profits to the company.

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    Just taken a 5 yr fixed btl with 1k set up fee for 1.79% so very cheap IMHO.

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    If (and I say Ďifí) you really think youíll get to 15 to 20 properties, then LTD is probably the way to go. Iíve been involved in this for 20 years now* and itís getting so much harder all round - for a start property prices make it very hard. If you have a serious amount of money/financial backing itís doable, if not I think youíll be surprised how hard it is to expand to those levels.

    As I said in my earlier post the key decision is probably based on what you (and your spouse) earn and whether it takes you into a higher threshold. If it doesnít LTD may turn out to be a long term costly extravagance. Remember you could always opt to go limited in the future.

    Also consider that the government encouraged many sole traders and partnerships to go limited a few years ago as letís face it, if you earnt over a certain amount it was cheaper. Now many people have done it, they have sort of changed the goalposts with the extra dividend tax thatís been brought in. Who knows once many landlords are limited if they will change the rules?

    I would opt for caution myself, but only a professional adviser can confirm this.

    * As a landlord with numerous properties and also in a professional capacity as I have 6 mortgage advisers in my business.

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    Buying via a ltd company will not avoid the additional SDLT.

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    Quote Originally Posted by Devonian View Post
    If (and I say Ďifí) you really think youíll get to 15 to 20 properties, then LTD is probably the way to go. Iíve been involved in this for 20 years now* and itís getting so much harder all round - for a start property prices make it very hard. If you have a serious amount of money/financial backing itís doable, if not I think youíll be surprised how hard it is to expand to those levels.

    As I said in my earlier post the key decision is probably based on what you (and your spouse) earn and whether it takes you into a higher threshold. If it doesnít LTD may turn out to be a long term costly extravagance. Remember you could always opt to go limited in the future.

    Also consider that the government encouraged many sole traders and partnerships to go limited a few years ago as letís face it, if you earnt over a certain amount it was cheaper. Now many people have done it, they have sort of changed the goalposts with the extra dividend tax thatís been brought in. Who knows once many landlords are limited if they will change the rules?

    I would opt for caution myself, but only a professional adviser can confirm this.

    * As a landlord with numerous properties and also in a professional capacity as I have 6 mortgage advisers in my business.

    Thanks for the advice.
    15-20 is my aim, luckily for me I am young so do have time on my side to build up a portfolio.

    My current income is based on PAYE at a low level like most directors and then the remaining taken as dividends. My instinct is to start with a personal mortgage and then look in to the LTD route once I have a few houses? Possibly go down the management company route as mentioned?

    As I said the profit the houses make isnít huge initially and I donít need the actual money so I can allow it to build in an account to use on more properties rather than drawing it each month.

    Thanks again, any further advice is welcomed.

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    Quote Originally Posted by draftsmann View Post
    fees charged by the management company should be reasonable and in line with independent companies providing similar services. In other words it would be unduly aggressive to shift all or the bulk of profits to the company.
    Correct. The term is "arm's length". What would an unconnected 3rd party charge for the services the company provides? Obviously means you actually have to be doing the management yourself! Your income tax saving is only the difference in company vs personal tax rates.

  19. #19
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    Quote Originally Posted by GC2012 View Post
    My instinct is to start with a personal mortgage and then look in to the LTD route once I have a few houses?
    Remember that transferring property you hold personally to a company will give you a second hit of SDLT.

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    Quote Originally Posted by draftsmann View Post
    Remember that transferring property you hold personally to a company will give you a second hit of SDLT.
    I did think that.

    Itís a tricky situation, LTD co is better long term but initially starting out it costs more which is when I need the spare cash!

    Personal better to start but possible headache in the future.

    Would a management company work long term, if I had a few houses and decided to start taking an income of say £1000 per month from the profit could I then pay myself in a similar or more cost effective way than if they were just all in a ltd co? Which I presume would just be dividends.

  21. #21
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    If you're planning long term then one benefit of ltd co investment is that it's more tax efficient to pass to your kids/family. You can loan them £5m (whatever the portfolio is worth) to buy the shares, they pay you interest on loan funded by the rental income. Circumvents inheritance, cap gains tax, SDLT.. just costs share sale stamp tax which is a few hundred quid.

  22. #22
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    Quote Originally Posted by Devonian View Post
    Also consider that the government encouraged many sole traders and partnerships to go limited a few years ago as letís face it, if you earnt over a certain amount it was cheaper. Now many people have done it, they have sort of changed the goalposts with the extra dividend tax thatís been brought in. Who knows once many landlords are limited if they will change the rules?.
    Very good point; I was thinking the same.

    Be very cautious letting the tax tail wag the commercial dog (as I think we used to say).

  23. #23
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    Quote Originally Posted by KingKitega View Post
    If you're planning long term then one benefit of ltd co investment is that it's more tax efficient to pass to your kids/family. You can loan them £5m (whatever the portfolio is worth) to buy the shares, they pay you interest on loan funded by the rental income. Circumvents inheritance, cap gains tax, SDLT.. just costs share sale stamp tax which is a few hundred quid.
    How do you think that saves inheritance tax? The loan is part of your estate.

  24. #24
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    Quote Originally Posted by David_D View Post
    Be very cautious letting the tax tail wag the commercial dog (as I think we used to say).
    Yes indeed- Iíve said this to quite a few clients, together with the variant (Iím a TEP) ďdonít let the tax tail wag the estate planning dogĒ.

    Unfortunately itís become increasingly common for perfectly ordinary structuring of family businesses and personal wealth to end up well and truly shafted as a consequence of changes in tax policy. It means that people like Mr Devonian and myself (and you too I guess) have to qualify our advice by telling the client that it is based on current tax law and practice and that the consequence of later unforeseen changes canít be laid at our door.

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    Quote Originally Posted by KingKitega View Post
    If you're planning long term then one benefit of ltd co investment is that it's more tax efficient to pass to your kids/family. You can loan them £5m (whatever the portfolio is worth) to buy the shares, they pay you interest on loan funded by the rental income. Circumvents inheritance, cap gains tax, SDLT.. just costs share sale stamp tax which is a few hundred quid.
    But you need liquid funds to be able to do that, as you are going to need to pay Ďspecialí corporation tax to the tune of 25% of any loan (refundable depending on outstanding loan).

    I believe there is a benefit (before death/inheritance) in creating a Ltd Co with distributable shares - whereby shares tax is sig cheaper than Stamp Duty on property sales. I dare say HMRC will crack down on that too - in the future.

    I think one needs to put a few numbers into any scenario, and trace what money is paid to who and where - to see what liquidity is required.

    Loan from the company, in order to avoid BIK to individual - interest paid (set at 3.5% just now?) to LTDCO is treated as revenue, so Corp tax paid on it.
    Rent to individual is treated as income.

    Itís complicated, and on a large portfolio - a simple tax change can throw it awry.

  26. #26
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    Ltd management company charges any fee it can against personal rental income, transferring bulk of income to most tax efficient outfit,its a best of both worlds.

    until mortgage companies make the net profit of rental business more relevant

  27. #27
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    An enlightening thread and a cautionary tale of how moving goalposts can create a lot of decisions to be made/costs to be incurred.
    A few more bits of information - http://www.telegraph.co.uk/investing...vestment-80pc/

  28. #28
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    Quote Originally Posted by MCFastybloke View Post
    Ltd management company charges any fee it can against personal rental income, transferring bulk of income to most tax efficient outfit,its a best of both worlds.
    Disagree. Youíd be setting yourself up for problems, as already outlined:

    Quote Originally Posted by draftsmann View Post
    it would allow some of the profit to be shifted into the company... I think the key term here has to be ďsome of the profitĒ as in my view (and Iíve had a fair amount of involvement in tax planning involving splitting of revenues between different entities) the fees charged by the management company should be reasonable and in line with independent companies providing similar services. In other words it would be unduly aggressive to shift all or the bulk of profits to the company.
    Quote Originally Posted by David_D View Post
    Correct. The term is "arm's length". What would an unconnected 3rd party charge for the services the company provides? Obviously means you actually have to be doing the management yourself! Your income tax saving is only the difference in company vs personal tax rates.

  29. #29
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    Sounds a nice plan, donít forget to factor in the running costs of letting 1 house then multiply it by how many you want.

    Set up costs apart from the initial investment could include bringing the house up to not only a liveable standard but from a safety aspect as well. Last house cost 17k new kitchen, bathroom, re plastered decorated, low maintenance gardens with decking, new soffits windows doors with all rooms upstairs with fire escape windows, electrical system checked fitted updated and tested same with gas, house alarm, all Flooring and tiles, safety blinds incase they have children.

    A profit of £250.00 per month could be blown away by a broken boiler or leaking roof and leave you in debt, have a good team or workmen you can call on or leave it to the agent and pay through the nose.

    One bit of advice donít do it on the cheap it wonít work especially if you plan to expand.

    15-20 properties sounds nice make sure you have at least a grand per house available for emergency repairs, if you look after your tennentís they should look after you.

    Most people worry when a storm approaches about possible damage to there property a landlord is no exception I worry multiplied by 9.

    Good luck and have fun.

    Real familyís live in these donít ever forget that






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  30. #30
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    Quote Originally Posted by draftsmann View Post
    Thatís a very interesting idea. It wonít help on the tax relief issue on loan interest so given the OPís likely high level of borrowing it might not help him much.

    For a personal property portfolio with little or no debt it would allow some of the profit to be shifted into the company, taxable at the corporation tax rate which is obviously much lower than the higher and top personal rates and parked there. I think the key term here has to be ďsome of the profitĒ as in my view (and Iíve had a fair amount of involvement in tax planning involving splitting of revenues between different entities) the fees charged by the management company should be reasonable and in line with independent companies providing similar services. In other words it would be unduly aggressive to shift all or the bulk of profits to the company.
    This is exactly why my accountant steered me away from doing this.

    If you can only shift what is a 'reasonable' management fee into the Ltd Co, it defeats the purpose.

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    Quote Originally Posted by Volvomanuk View Post
    Sounds a nice plan, don’t forget to factor in the running costs of letting 1 house then multiply it by how many you want.

    Set up costs apart from the initial investment could include bringing the house up to not only a liveable standard but from a safety aspect as well. Last house cost 17k new kitchen, bathroom, re plastered decorated, low maintenance gardens with decking, new soffits windows doors with all rooms upstairs with fire escape windows, electrical system checked fitted updated and tested same with gas, house alarm, all Flooring and tiles, safety blinds incase they have children.

    A profit of £250.00 per month could be blown away by a broken boiler or leaking roof and leave you in debt, have a good team or workmen you can call on or leave it to the agent and pay through the nose.

    One bit of advice don’t do it on the cheap it won’t work especially if you plan to expand.

    15-20 properties sounds nice make sure you have at least a grand per house available for emergency repairs, if you look after your tennent’s they should look after you.

    Most people worry when a storm approaches about possible damage to there property a landlord is no exception I worry multiplied by 9.

    Good luck and have fun.

    Real family’s live in these don’t ever forget that

    Add in to that the likelihood of raising interest rates and stagnant/little capital appreciation.
    Not sure I’d like to be starting off on a BTL journey at present






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  32. #32
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    Quote Originally Posted by Volvomanuk View Post
    Sounds a nice plan, donít forget to factor in the running costs of letting 1 house then multiply it by how many you want.

    Set up costs apart from the initial investment could include bringing the house up to not only a liveable standard but from a safety aspect as well. Last house cost 17k new kitchen, bathroom, re plastered decorated, low maintenance gardens with decking, new soffits windows doors with all rooms upstairs with fire escape windows, electrical system checked fitted updated and tested same with gas, house alarm, all Flooring and tiles, safety blinds incase they have children.

    A profit of £250.00 per month could be blown away by a broken boiler or leaking roof and leave you in debt, have a good team or workmen you can call on or leave it to the agent and pay through the nose.

    One bit of advice donít do it on the cheap it wonít work especially if you plan to expand.

    15-20 properties sounds nice make sure you have at least a grand per house available for emergency repairs, if you look after your tennentís they should look after you.

    Most people worry when a storm approaches about possible damage to there property a landlord is no exception I worry multiplied by 9.

    Good luck and have fun.

    Real familyís live in these donít ever forget that






    Sent from my iPhone using Tapatalk

    Thanks for the advice. The properties I am looking at all need a bit of work, similar to what you mentioned.
    My plan is to go in and re-plaster, paint, carpets, new kitchen and bathroom and then get everything such as boilers, electrics checked and a general walk round to see if there is anything external which could need replacing such as old fence/broken tiles etc which will be replaced to hopefully 'future proof' the house for a bit. I wont be letting the properties out in a state as it will just cost me more in the long run replacing bits at a time.

    Still none the clearer regarding personal vs LTD co mortgage. So many pro's and con's of each.
    I am swaying more towards the personal option, I dont know what the future will holds. Maybe I will buy a few houses and decide its not for me, circumstances could change etc etc. If that was the case I might have just 3-5 properties and then all the headache of the limited co when in fact its probably not needed at such a small amount.

    My other question is regarding the management company option. If I am only taking a small profit from each anyway and leaving the bulk of the profit in the account to cover any repairs or just generally save up for the next property could this option not work based on such a small amount of drawings each month?

  33. #33
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    The management option is solid - perfectly legitimate and you can also charge an advisory fee for sourcing and refurbishing the property - 10% doesn't sound unreasonable. And if your investments are successful, I'm sure you will have investors requesting your services (and this further legitimises the management co)


    Regarding repairs, just charge 10% of the costs. To get a ballpark figure just ask any estate agent their full management fee structure, and use similar.
    Last edited by KingKitega; 14th February 2018 at 10:56.

  34. #34
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    Quote Originally Posted by KingKitega View Post
    The management option is solid - perfectly legitimate and you can also charge an advisory fee for sourcing and refurbishing the property - 10% doesn't sound unreasonable. And if your investments are successful, I'm sure you will have investors requesting your services (and this further legitimises the management co)


    Regarding repairs, just charge 10% of the costs. To get a ballpark figure just ask any estate agent their full management fee structure, and use similar.
    It's as "solid" as its execution. Better to say "It can be solid provided it is operated correctly in a reasonable and commercial way".

    When I give one-to-one tax advice to a client I will qualify the advice in this way.

    During my career I've devised several tax planning arrangements which are, for want of a better expression, promoted by salespeople as retail products. In this case while I will include caveats as a matter of course and do everything I can to make the arrangement and its processes foolproof, it's in the nature of salesmen to cut corners and gloss over details in order to close the deal. Here is where problems can arise.

    For structuring like this, take proper advice.



    Edit: I'm still curious to know why you think a personal loan to children used to buy your shares will save IHT. There could be an IHT saving if something else happens subsequently. What do you have in mind?
    Last edited by draftsmann; 14th February 2018 at 11:32. Reason: addendum

  35. #35
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    Quote Originally Posted by GC2012 View Post
    Thanks for the advice. The properties I am looking at all need a bit of work, similar to what you mentioned.
    My plan is to go in and re-plaster, paint, carpets, new kitchen and bathroom and then get everything such as boilers, electrics checked and a general walk round to see if there is anything external which could need replacing such as old fence/broken tiles etc which will be replaced to hopefully 'future proof' the house for a bit. I wont be letting the properties out in a state as it will just cost me more in the long run replacing bits at a time.

    Still none the clearer regarding personal vs LTD co mortgage. So many pro's and con's of each.
    I am swaying more towards the personal option, I dont know what the future will holds. Maybe I will buy a few houses and decide its not for me, circumstances could change etc etc. If that was the case I might have just 3-5 properties and then all the headache of the limited co when in fact its probably not needed at such a small amount.

    My other question is regarding the management company option. If I am only taking a small profit from each anyway and leaving the bulk of the profit in the account to cover any repairs or just generally save up for the next property could this option not work based on such a small amount of drawings each month?
    There are lots of online publications (PDF) that are available if you google them. (WRT Ltd Co ownership of BTL property)

    I'll try to post links to them

  36. #36
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    Quote Originally Posted by GC2012 View Post
    My other question is regarding the management company option. If I am only taking a small profit from each anyway and leaving the bulk of the profit in the account to cover any repairs or just generally save up for the next property could this option not work based on such a small amount of drawings each month?
    Not sure if I have misunderstood, but if you own the properties privately you are taxed on the (net) rents that arise. Whether you take money out or reinvest it, it's still taxable. Any money earned by a company (whether a property management company or a company holding properties) is likewise taxed as it's earned. Any money you take from the company may be taxable (salary or dividends in excess of the current dividend allowance - £2,000 from next tax year).

  37. #37
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    Quote Originally Posted by David_D View Post
    Not sure if I have misunderstood, but if you own the properties privately you are taxed on the (net) rents that arise. Whether you take money out or reinvest it, it's still taxable. Any money earned by a company (whether a property management company or a company holding properties) is likewise taxed as it's earned. Any money you take from the company may be taxable (salary or dividends in excess of the current dividend allowance - £2,000 from next tax year).
    I think the difference is if you're in a higher tax bracket, in which case your rental income will be taxed at 40%.

    In a Ltd Co it would be 20%, though granted there are additional taxes if you decide to take a divi.

  38. #38
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    Sorry David, I am with you now.

    Hmm, I will do a bit more re-search online.
    I have a broker calling me this afternoon but judging from her email there was only 2 LTD co providers who fit my criteria so depending on costs I might have to go down the personal route.

  39. #39
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    I have a property in a Ltd company. There are pros and cons to this arrangement, but by far the most important factors have been buying the right property at the right price in the first place, getting in a decent tenant etc.

    We set up the company to trade in a completely different sector, and FWIW, knowing what I now know, I wouldnít have bothered to set up as Ltd. company just to buy the property. As others have said, the changes to dividend taxation etc. have also taken their toll. We donít have a mortgage on the property so the differences in treatment of mortgage interest donít matter. Owning a property in the company also buggered up our chances of liquidating and getting entrepreneurís relief. We are now effectively treating the company like a pension fund - taking money out in the future once I am retired and have a lower income will be more tax efficient than taking it out now (except someone is bound to change the law just before I retire :) ).

    If you are serious about 15-20 properties you must have a pretty good business plan already. If you are trying out 1 to see how you get on, I would try it without a Ltd. company unless it is very high value.

  40. #40
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    Quote Originally Posted by alfat33 View Post
    I have a property in a Ltd company. There are pros and cons to this arrangement, but by far the most important factors have been buying the right property at the right price in the first place, getting in a decent tenant etc.

    We set up the company to trade in a completely different sector, and FWIW, knowing what I now know, I wouldnít have bothered to set up as Ltd. company just to buy the property. As others have said, the changes to dividend taxation etc. have also taken their toll. We donít have a mortgage on the property so the differences in treatment of mortgage interest donít matter. Owning a property in the company also buggered up our chances of liquidating and getting entrepreneurís relief. We are now effectively treating the company like a pension fund - taking money out in the future once I am retired and have a lower income will be more tax efficient than taking it out now (except someone is bound to change the law just before I retire :) ).

    If you are serious about 15-20 properties you must have a pretty good business plan already. If you are trying out 1 to see how you get on, I would try it without a Ltd. company unless it is very high value.
    Thanks, this is my thinking at the moment. Just take the first couple of properties as they come before jumping in to a LTD co.
    I can then look at solutions later down the line if things go to plan.

  41. #41
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    Quote Originally Posted by demonloop View Post
    I think the difference is if you're in a higher tax bracket, in which case your rental income will be taxed at 40%.

    In a Ltd Co it would be 20%, though granted there are additional taxes if you decide to take a divi.
    Yes, absolutely, I expressed myself badly. I was just making the point that tax arises on profits irrespective of the fact that you may be using all your income to reinvest in the business. HMRC will want their slice. Obviously it's a cashflow thing and you may be able to use funds in the short-term but always remember to have cash available for tax when it's due.

  42. #42
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    Quote Originally Posted by GC2012 View Post
    Thanks for the advice. The properties I am looking at all need a bit of work, similar to what you mentioned.
    My plan is to go in and re-plaster, paint, carpets, new kitchen and bathroom and then get everything such as boilers, electrics checked and a general walk round to see if there is anything external which could need replacing such as old fence/broken tiles etc which will be replaced to hopefully 'future proof' the house for a bit. I wont be letting the properties out in a state as it will just cost me more in the long run replacing bits at a time.
    You need to be a bit careful in categorising "upfront" spend. Even accountants struggle to agree on the details but, depending on the state of the properties, some/all of the expenditure may be regarded as part of the cost of the property rather than a repair. That would mean you would only get tax relief against a future capital gain rather than offsetting current rental receipts.

    Gas safety is the big one. You must have a current annual safety certificate or you would be committing a criminal offence.

  43. #43
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    Quote Originally Posted by draftsmann View Post
    I'm still curious to know why you think a personal loan to children used to buy your shares will save IHT. There could be an IHT saving if something else happens subsequently. What do you have in mind?
    Had to double check with my accountant after seeing your occupation under your profile(!!)

    Basically, I think a limited company structure to hold property offers more long term tax flexibility than property held in personal names, but it does require plenty of planning/guesswork beforehand so that your estate is below the (current) £1m threshold to minimise IHT. If you give a personal loan yes it will fall under your estate as its technically an asset so you need to plan (unless you know exactly when you will die) well ahead to ensure the outstanding is paid off, or below the threshold at the minimum. My accountant mentioned one could alternatively gift the shares to take advantage of one's CGT allowance each year too - but again you will likely need to plan well ahead with a large portfolio. I'm sure there are even more efficient structures out there but if you don't know - you don't know.

    In the end, there's not one solution for all, and definitely seek proper professional advice - not some watch forum responses!

  44. #44
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    Quote Originally Posted by KingKitega View Post
    Had to double check with my accountant after seeing your occupation under your profile(!!)

    Basically, I think a limited company structure to hold property offers more long term tax flexibility than property held in personal names, but it does require plenty of planning/guesswork beforehand so that your estate is below the (current) £1m threshold to minimise IHT. If you give a personal loan yes it will fall under your estate as its technically an asset so you need to plan (unless you know exactly when you will die) well ahead to ensure the outstanding is paid off, or below the threshold at the minimum. My accountant mentioned one could alternatively gift the shares to take advantage of one's CGT allowance each year too - but again you will likely need to plan well ahead with a large portfolio. I'm sure there are even more efficient structures out there but if you don't know - you don't know.

    In the end, there's not one solution for all, and definitely seek proper professional advice - not some watch forum responses!
    Your initial comment re flexibility used to be the case in far more instances but now it is very much horses for courses. As a case in point, holding UK residential property via a non-UK company used to be a very effective IHT shelter for non-UK domiciled (and typically also non-resident) individuals. Unfortunately retroactive/retrospective legislation in recent years has left those holding structures no longer fit for purpose.

    The IHT threshold is £325k but in the present tax year there is an additional "residence nil rate band" of £100k which only applies when an individual's home is passed to children/descendants. This is fully interchangeable between spouses or civil partners so in this tax year the joint threshold is £850k. The single residence nil rate band is increasing by £25k each year for a further 3 years, so by 2020 there will effectively be a £1M threshold for married/civil partner couples albeit subject to conditions.

    In your scenario the loan is an asset included in the individual's estate. As such the loan rights could be the subject of a gift, either outright or onto trust. With careful planning and surviving 7 years this would be effective.

    Alternatively as you suggest loan repayments could be made by the children or other borrowers periodically and used by the lender to pay for living expenses or other disposable expenditure such as holidays. In an ideal world the individual would then die as soon as the last repaid penny is spent. Such things cannot always be easily planned!

    There are opportunities for far more interesting planning using debt but discussing them falls outside the scope of an internet forum.

  45. #45
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    Quote Originally Posted by GC2012 View Post
    Evening everyone,


    I am in the market for a buy to let property local to me, I have the deposit saved up and done all the usual re-search. I have family with a few BTL properties so I know approx yield etc etc.

    My main question is to buy as a personal mortgage or LTD co.
    I am planning on buying 2, possibly 3 properties this year and same year after year to build up quite a big portfolio.

    My accountant is saying LTD co for tax purposes however the mortgages are harder to obtain, more expensive and so on. On the other hand my mortgage broker is saying its much easier to get a personal one and go down that route.

    What are members on here doing, I am looking for an unbiased opinion as I can see both points above.
    Personal will save me some hassle and is cheaper but if I want to go LTD in the future it could then cause problems.


    Thanks
    Personally I would buy 1 and see how it works out
    We have been buying/selling and renting properties for 25 years and I donít plan to buy anymore at the present time
    Property prices seem high and changes to taxation with interest rates due to rise etc make it marginal unless you can buy v well
    It used to be such a no brainer -20% down, 10% rental return with good capital gains
    Most of the people I know in this business are slowly selling properties not buying them
    Good luck

  46. #46
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    Quote Originally Posted by kickstart View Post
    Personally I would buy 1 and see how it works out
    We have been buying/selling and renting properties for 25 years and I don’t plan to buy anymore at the present time
    Property prices seem high and changes to taxation with interest rates due to rise etc make it marginal unless you can buy v well
    It used to be such a no brainer -20% down, 10% rental return with good capital gains
    Most of the people I know in this business are slowly selling properties not buying them
    Good luck

    I'm not sure there isn't the potential for price growth in some areas - prices around here are pretty much where they were 10 years ago.

    However, I agree that a significant threat is rising interest rates. Also, the increasingly punitive regulatory regime for landlords. Landlords are now unpaid border staff; Labour will require you to let to tenants with pets irrespective of your wishes; minor admin failures can prevent you gaining possession of your property or result in disproportionate financial penalties. Higher CGT rates than someone trading shares; interest tax relief restriction; some councils making money by licensing landlords. Most of these changes were introduced to deal with issues pretty well confined to the South East of England.

    The days of the amateur landlord are numbered, I think is the bottom line. It's not a hobby any more.

    Government doesn't seem aware that many tenants are renting as a lifestyle choice (older people) or because they are not able to get a mortgage. If private landlords disappear, I'm not sure where they will live.
    Last edited by David_D; 15th February 2018 at 22:34. Reason: typo

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