BTL purchasing: as indvidual or via new company?

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    BTL purchasing: as indvidual or via new company?

    Hi, im in the process of finding 5 properties to purchase, mortgaged on a buy to let basis. I intend to pay 15-20% deposit on each purchase from my savings. Should i purchase as an individual or would it benefit me to set up my own company?

    #2
    Originally posted by jingle68 View Post
    Hi, im in the process of finding 5 properties to purchase, mortgaged on a buy to let basis. I intend to pay 15-20% deposit on each purchase from my savings. Should i purchase as an individual or would it benefit me to set up my own company?
    The simple answer, as has been answered many times previously, is, ''it depends on your personal circumstances''.

    There are many pros and cons in each case.

    The main advantage of a company structure is that Corporation Tax rate is 19% whereas personal income tax rate can be 22% basic rate or 40% higher rate tax depending on your other personal taxable income and gains.

    But the advantage of low company taxation will not produce much savings as profits, after loan interest, will not be that much.

    Also, any income extracted as dividends will be taxed at your personal rates and therefore the company structure is only beneficial to the extent that all profits is accumulated within the company or only extracted where they are contained within your personal basic rate.

    The company structure is also helpful where you need to transfer part ownership to others by way of shares whereas this is no so easily done with properties.

    The biggest disadvantage of a company structure in my opinion is that any gains by companies do not benefit from taper relief, personal residence relief, lettings relief or annual exemption. There is also a double taxation effect if and when you wish to disband the company structure. The company suffers Corporation Tax as it goes along and when you finally dissolve the company, you may have to pay tax on post-tax accumulated reserves in the comany which you extract as dividends or capital distributions.

    You really need to sit down with a professional advisor and decide for yourself which route is better for you.

    Without any detailed information (I don't want to see this ), I would plump for the sole trade route or better still, joint ownership with your spouse, if you have one.

    If you wish to accumulate a large portfolio, say 10 or more properties, and not wishing to sell any in the foreseeable future, then you may wish to consider the company structure.

    It is really a ''horses for courses'' approach.

    Ramnik
    Private advice is available for a fee by sending a private message.

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      #3
      thank you for your advice.

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        #4
        This is always a question that troubles first time investors. I'd like to simplify, if i may (even tho it may not be necessary in the face of ramniks comprehensive responses).

        If the income from your investments isnt going to take you into the higher rate tax bracket, then incorporating a company really isnt worth the complexity and expense.

        When the time comes (if you continue expanding your protfolio) you can just as easily incorporate a company to hold additional property assets, so theres no danger of missing the boat anyway.

        Dont stress over it - just hold your assets personally (or ideally with your spouse) for now and the best scenario for you will become clear as experience and professional advice accumulate.

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          #5
          Originally posted by Massive View Post
          This is always a question that troubles first time investors. I'd like to simplify, if i may (even tho it may not be necessary in the face of ramniks comprehensive responses).
          Massive,

          My response was comprehensive as you say but I did fail to draw out the conclusions as you have succinctly and clearly done.

          Well done.

          Ramnik
          Private advice is available for a fee by sending a private message.

          Comment

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