I have one flat which I rent out. I don’t make much from it due to the outgoing mortgage payments and higher rate income tax. A friend suggested an idea and I would like to know whether anyone has experience in doing this.
1. create a company and let the property to that company for a nominal rent
2. The company will sublet it to the tenants at the market rate
3. Difference between the nominal rent and the rent paid by the tenant will be company’s profits. I, as the director, would pay 19% tax on it
4. I will also pay 40% tax on the nominal rent received from the company but overall outgoing tax will be lower compared to the current arrangement
Anyone doing it this way? Any pitfalls you can see?
