Jane Darby Posted August 3, 2009 Report Share Posted August 3, 2009 Dear colleagues I would like some advice on what is the most effective way in setting up. As background, I own one property outright. I am considering taking out a buy to let mortgage on this to release equity to invest in two further properties. On the basis I plan to take out mortgages, should I set up a formal business or remain as an individual who is self employed? I currently work so am employed also. With thanks JD1 Link to comment Share on other sites More sharing options...
Trenners Posted August 3, 2009 Report Share Posted August 3, 2009 Hi JD1, I am sure you will get lots of advice from the qualified accountants on the forum. As a landlord, I have purchased my portfolio of properties in my own name as it is easier to raise finance personally, than in a company's name, and profits can be offset against my personal tax allowance (and my wifes personal tax allowance) and any capital gains can be offset against our annual capital gains tax allowance. I make these points because companies don't have a personal tax allowance (you pay tax on all profits) and companies do not have a capital gains tax allowance (and any capital gain is also taex as profit). Company taxation is hirer that capital gains tax (at 18% at the moment). So as a company - mortgages are more expensive and personal / capital gains tax allowances don't exist ..... so I am not sure why you would choose to create a company rather than establish a personal portfolio ..... Good luck Mark Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted August 10, 2009 Report Share Posted August 10, 2009 Hi JD1, I am sure you will get lots of advice from the qualified accountants on the forum. As a landlord, I have purchased my portfolio of properties in my own name as it is easier to raise finance personally, than in a company's name, and profits can be offset against my personal tax allowance (and my wifes personal tax allowance) and any capital gains can be offset against our annual capital gains tax allowance. I make these points because companies don't have a personal tax allowance (you pay tax on all profits) and companies do not have a capital gains tax allowance (and any capital gain is also taex as profit). Company taxation is hirer that capital gains tax (at 18% at the moment). So as a company - mortgages are more expensive and personal / capital gains tax allowances don't exist ..... so I am not sure why you would choose to create a company rather than establish a personal portfolio ..... Good luck Mark Ditto ! How are you Mark ? The Rodent Link to comment Share on other sites More sharing options...
plym77 Posted August 13, 2009 Report Share Posted August 13, 2009 not just that, but there could be double taxation which can be avoided if personal. For eg, a portfolio of property for husband and wife making £50K per year PERSONAL -split profits equally - tax paid at marginal rate (20% or 40%) each with personal allowance to offset (depending on other income) - disposal = CGT annual exemption (£10100 each per year) then tax at 18% COMPANY - corporation tax at 21% (to rise to 22%) - tax 1 - extract income (slary or dividends)- both have separate tax consequences (but personal allowances available) - on disposal, no CGT annual exemption each and pay corporation tax rate (21/22% at this level) - again, extraction of profit on disposal would be via salary/dividend = more tax There are various issues to consider but in most circumstances, it isnt worth holding a residential property portfolio in a limited company due to the double taxation. it can work in some instances, where for example annual profits are high and not necessarily needed for you and you are a higher rate tax payer - in this instance keeping profits in a company taxed at 21/22% rather than paying higher rate tax potentially on the income, may warrant considering this structure further. there are a few other instances it can work in, but in most cases it is inadviseable. hope this helps Link to comment Share on other sites More sharing options...
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