UK Landlord Forum / Life

I currently have 2 BTL which (touch wood) are going well. I am in the process of buying another both are on repayment mortgages.  My question is after the budget and all the discussions around tax and BLT landlords would it be worth considering going down the road of a limited company?? I don't really know much about this but have heard bits and pieces on the internet.  Any signposting would be much appreciated.

Good question, one I have been considering myself. Anyone got any answers??

Please be careful of advice received from websites (including my own) and always do your own research.
Obviously I cannot understand your full situation from a small blog....

Could write loads on this but will limit to two basic issues (as you already own the two properties)

Issue 1. Tax (?!)
Any transfer from you to the company will most likely be a disposal for capital gains tax purposes, so taxable.
There will be a potential stamp duty charge for any properties worth more than £125,000.
This would probably make the exercise prohibitively expensive.

you'd be better off retaining existing properties personally and buying any future properties via a company. For this reason however....

Issue 2. Debt
Increasingly bank are not willing to lend to limited companies so your ability to get a mortgage might be limited (hah! pun intended) ...certainly uncompetitive.  So you need to take the effect of the "higher" cost against the savings in tax.

It's not clear this is a slam dunk to set up a company  corporation tax is 20% for both income and capital gain but then marginal income tax is based on the 0%, 20%....45% bands ..so what's your marginal rate of tax?  Also capital gains tax could be 18% vs corporation tax of 20%.
You then have have restrictions on when to take money out and when you sell and inheritance to consider etc etc.
I would suggest look at issues 1 and 2 then build a spreadsheet to figure out if the next property you buy should be in a company....

Can provide more details later but For now I think you are at exploratory stage.  Don't forget the new tax impact is phased in and if you are a 20% tax payer then you aren't affected anyway

Best of luck

(BobOff perhaps this could the subject of a blog article?)

We considered going to ltd co route 10 years ago, but decided against it, keeping our properties and continuing to buy in individual (joint) names.  The advantage as we saw it and how it did indeed work in practice, is that judicious use of your annual CGT allowances allows you to enjoy a tax free profit of £10,000 per annum per joint owner before you even have to consider parting with anything to the tax man.

It was also possible to borrow at a much higher LTV than we might have as a ltd co.