Self purchase or through a new limited company

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    Self purchase or through a new limited company

    I am buying my first BTL and maybe a second fairly soon. I am a PAYE high rate tax payer, so really dont need income for the next few years from my rental properties. I met someone who told me to set up a limited company which will buy the properties. I will lend the Company money at a rate of say 4% which equals the rent. I dont take any income out of the company until I retire so I dont pay any corporation tax or personal income tax. When I retire I can start taking money out and pay tax at my nominal rate.

    Does this seem right?

    Thanks in advance.

    #2
    Yes, except you will pay Income Tax at 40%/45% (or even 60%) on the interest paid to you by the company.

    Also, the company has to deduct 20% tax from the interest payments and pay it to HMRC.

    What income is there to withdraw from the company at retirement, if the company has made no profit?

    Comment


      #3
      Unless whoever advised the OP was a tax expert who knew the OP's financial situation in some detail, it is likely to be poor advice.

      Issues of income aside ( which King_maker has highlighted), any growth in portfolio value is income for a business (not a capital gain, which it would be for an individual) leaving the post corporation tax gain stuck in the company which you'll have to sell to extract or to somehow "dividend out". Both of which are taxable events for you.

      You might find out that setting up as a business is right for your particular situation, but it depends on a lot of factors ( and needs a lot of guess work about future rates of lots of different taxes).
      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

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