Self purchase or through a new limited company

  • Filter
  • Time
  • Show
Clear All
new posts

    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.

    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?


      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).


      Latest Activity


      • Reply to Corporation Tax
        by Thurrock1

        the other directors can't withhold information from them - I am my husband's agent as he has dyslexia and has difficulty with all this. This has been explained to the director but he does not like me and chooses not to recognise in that case anything I/my husband writes.
        25-11-2021, 09:39 AM
      • Reply to Corporation Tax
        by jpkeates
        If your husband is a director, the other directors can't withhold information from them; unless there are some very specific rules in the company articles - and they wouldn't normally be appropriate in a property development business (which are usually set up with boilerplate documentation).
        24-11-2021, 18:36 PM
      • Corporation Tax
        by Thurrock1
        Hi, Please can someone tell me if Corporation Tax only becomes payable to the IR on sale of an asset.
        My husband is a director of a property development company - there are only 3 directors.
        He wants to leave and there is no communication with the other directors and it is difficult to get...
        23-11-2021, 19:15 PM
      • Reply to Corporation Tax
        by theartfullodger
        IR (The Inland Revenue) were dissolved April 2005. Advise against sending them payments....
        24-11-2021, 17:50 PM
      • Reply to Corporation Tax
        by Thurrock1
        Thanks Gordon999. I have been phoning around about this today. This is a property development Ltd co. it had problems and so in 5 years only managed to develop 1 property - a house into flats. My husband owns one third of the company.

        It is not being sold. The other directors need to...
        24-11-2021, 17:47 PM
      • Reply to Corporation Tax
        by Gordon999
        The company pay CT on the "trading profit" reported in the annual accounts.( which are filed annually at Companies House).

        After the asset (the building) has been sold, the trading profit will be reported in the next annual accounts by accountant and CT will be payable to...
        24-11-2021, 11:33 AM
      • Reply to Student HMO and Holiday let
        by Neelix
        In most areas student houses don't pay council tax ....... move in a "non student" and Council tax will apply
        18-11-2021, 07:54 AM
      • Reply to Student HMO and Holiday let
        by nukecad
        Flag any of your posts (the little flag at the bottom of them) and ask the moderator if he can change the name for you....
        17-11-2021, 23:00 PM
      • Student HMO and Holiday let
        by lewis593
        Hello everyone. Can I rent my 4 bed property to students and holiday makers at the same time? For example 3 bedrooms will be used for students and 1 bedroom will be used as a holiday let. Would this have any tax/council tax implications? Would it be classed as a holiday let and be liable for business...
        17-11-2021, 19:54 PM
      • Reply to Student HMO and Holiday let
        by lewis593
        Can I rent my air b and b property to students?
        17-11-2021, 20:34 PM