UK Landlord Forum / Life

Hi

I have four properties generating circa £24k pa. The properties are held in my wife's name and the income is subject to UK income tax at her marginal rate.

Is there a threshold when it becomes sensible financially to run this through a limited company?

Thanks

PrestlandMan

It depends...

You'd have additional costs in terms of accounts prep/compliance work and, if you wanted the limited company to own the properties, conveyancing costs and stamp duty. (There would also be Capital Gains tax but that's only really a timing issue as you'll end up paying it one day.)

A limited company can get full tax relief on any mortgage interest so, depending on your wife's marginal rate, that might be a saving. However, you'll find that number of mortgage lenders shrinks even further from what's available to unincorporated borrowers and the rates will be less attractive so you'll be paying more interest in the first place.

A limited company gives you extra protection in the event of it all going tizzup: broadly speaking, you only stand to lose what you put in (although that's quite enough in a business like this) and it's easier to manage if you wanted to bring in new owners at some point. If it's just the two of you, though, the benefits are marginal.

On the whole I can't give a definitive answer but, based on what you've said, I doubt it's worth it to incorporate at this stage.