Should we start a Ltd Company?

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    Should we start a Ltd Company?

    Hi All

    What is it that pushes people to put their properties into a Ltd Company, should I do this?

    So currently, my fiancée has a flat we plan to sell in a year or two for a freehold house. I have just inherited half a house purchasing the other half from my sister. It requires extensive work so we now have a bridging loan to get the works done before a buy-to-let mortgage (about to start being renovated). We are hoping to split the land and build a bungalow at the bottom of the garden as it as access to another road. If all goes as planned with money coming out if planning is approved and selling the flat we could end up with 4 maybe even 5-6 properties including our own,

    I currently earn 34k basic with no overtime and my fiancée is already a high rate tax payer. So my question is, should we transfer all but our own property into a Ltd Co. as we do not need the income that much as our lifestyle isn't that extravagant. We just want a nice pot for the future as a retirement fund.

    Any advise greatly appreciated.

    There isn't really a one size fits all answer to this.
    You probably need to work it through with an accountant, so you can model the alternatives.

    One point to consider is that you don't "transfer" property to the company, the company buys it from you (and everyone pays tax that's due on such an event).

    Also, any increase in value to the property is capital gain for you and income for a company - which affects the tax paid.

    The bridging loan is likely to be more complex with a company.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


      1. For property held under private name , the rental income is added to the job income and taxed at personal income tax rates at 20% or 40% . For mortgage loan interest, only 20% of the annual interest may be deducted as operating expenses.

      2. For property held under company name, the company has to submit annual accounts to Companies House and report annual profit in a company tax return to Tax Office. For mortgage loan interest, 100% of interest paid is allowed as operating expenses and profit is charged at 19% . So there is benefit for persons on 40% tax rate, to operate the property rental business under company name since the company pays 19% tax rate on annual profit.

      3. For disposal of fiance's flat to company, there may be capital gains tax at 28% to pay on the capital gain ( after deducting the personal allowance of £12,300 ) .

      4. Operating the rental business through a company can be a hassle, paying for company expenses including higher interest rate on borrowings , submitting annual accounts to Companies House and paying accountant for preparing the accounts.


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