Buying a property to live in (main residence) via LTD - TAX IMPLICATIONS?

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    Buying a property to live in (main residence) via LTD - TAX IMPLICATIONS?

    I wanted to buy a property under LTD. I would use this property as my main residence.
    My intention would be to live in this property. I would not rent it out in long term or at least for 10 years.
    I would be the main and the only director of this company.
    What are the tax implications?
    Would I need to pay any addition tax or would my residence be treated as benefits in kind as I would not be receiving any rent but living in it.

    If I was to take out money as dividend from LTD and purchase the property under personal name then I would fall into 40% tax but when I run LTD I just need to pay 20% tax each year.
    This option to buy a property to live in would be more realistic specially if the property cost around £650’000.
    I jest wanted to know if this was possible and if there are any tax implications when buying in this way main residence or if I could use it as main residence?

    #2
    Not much of that makes any sense.
    I'd talk to an accountant.

    When you own the property you live in, there's neither income or expense, so tax isn't, generally, relevant.
    Owning the property you live in via a company will be next to impossible if you want a mortgage.
    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


      #3
      I would say benefit in kind at the full market rent.

      It will probably also ring alarm bells at HMRC, so your tax position would need to be watertight.

      Comment


        #4
        It sounds a bad idea. You'd be caught by both the 3% SDLT surcharge and, when you sell, corporation tax on any capital gain. In addition, I would guess it'd be difficult getting a mainstream mortgage for this arrangement (you may need to go to a specialist lender which would charge rather higher interest rates, or you may find that it isn't possible at all).

        Comment


          #5
          1. If you use a company to buy a residential property valued £500,000 and £1 Mil , there is an annual levy ( ATED ) of £3650 .

          The company will also pay corporation tax at 19% on any profit ( capital gain ) after selling the property .

          If you as director live in the property and pay no rent, you will be charged annual tax at 40% on the "director's benefit" ,

          If you draw out cash from the company in the form of a dividend , you will have to pay 32.5% on the dividend.

          2. If you buy the property to hold under your own name and live in the property as your main residence, the capital gain made during your period of residence is exempted ( = NIL cgt.).

          If you rent out the property after a few years residence, the capital gain is apportioned between the own residence period and rental period . The capital gain under the rental period will be charged cgt at 28%.

          3. If the property is held for 10 years only , I would expect to see a 30% rise in property value ( £650K) = £195K and holding under personal name gives the Nil capital gains tax ( =best result)..

          But if the company holds the property, the company make a profit of £195K and the corporation tax is approx £37K and £195K - £37K = £158K is retained by the company.

          You need advice from an accountant on whether a director can borrow from the company at say 0.5% interest.rate. .

          Comment

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