When to start a LTD company

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    When to start a LTD company

    At what point should I consider purchasing properties through a Ltd company, rather than my own personal name?

    At the moment I have a wage of £15k per year, plus 3 rental properties that each make approx £2500 profit per year (so an overall income of £22500/yr). The properties I typically buy cost between £40k - £80k. Eventually, I would like to drop my day job (ie -£15k) when the rental income reaches £20k/yr (so, within 2 yrs if all goes well)
    At the moment I have the properties in my own name. The way I see it, is that I have a tax free allowance of £11-£12k anyway, and at the moment SOME of the basic refurb costs of any new property purchased is off-set against my tax. So, taking into account that I will drop my day job eventually, would I be correct in thinking that it's fine to keep buying in my own name until I reach the £12k mark from rentals?

    Thanks.

    #2
    How old are you may I ask? -- nearing retirement i.e. 60+ or so.

    What is your pension provision? Do you have any other investments/savings/mortgages?

    What sort of standard of living do you like? Yes some people are quite happy living at a subsistence level, sewing their own clothes and never going out, owning a car, eating out, buying gadgets -- and that's fine.

    With very very low earnings your tax will also be very low (a few hundreds of pounds a year) so a company will hardly save anything and will cost more than it saves. And that is based on current legislation and tax regime.

    Comment


      #3
      I'd sit down with an accountant and model the costs.

      The answer to the question for many people is "if you didn't do it before you bought the properties, the cost of change is more than the benefit for many years".
      The key thing is how many years it would take and how many years you have.
      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).

      Comment


        #4
        The Personal tax is charged at £11,500 at Nil rate ( personal annual allowance 0

        Between £11,500 to £45,000 is charged at 20% basic rate.

        Above £45,000 raises your tax rate to 40%.

        Company tax rate is 19 % rate on profit.

        So you have no need to think about using "company mask " until your income exceeds £45,000.

        Comment


          #5
          I've thought about this but I think it all depends on how much you need to pay in finance costs as a limited company opposed to a standard buy to let as the savings you make going Ltd can easily be eaten up in additional interest.

          Comment


            #6
            These days there are too many moving parts to be able to give generic advice on when to use a Ltd Co or not. Your full circumstances need to be taken into account.

            Comment


              #7
              AndrewDod,

              I'm 46 yr old, and have rubbish pension provisions, I'd be lucky if my pension buys me a cup of coffee, so that's why I'm trying to go down the rental route.

              I am not after a swimming pool or lavish holidays, I'd be happy just paying my basic bills and have a cheapish holiday once a year, I'm not materialistic as I hate shopping, so I don't spend money in that way, but I do like nice meals out on a regular basis.

              Thanks.

              Comment

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