property trading...LTD vs Individual

theGrinch

I want to work full time buying and selling property in the UK. Not developing, just buying and looking for a quick sale on. However, I am confused as to whether it is better to just do this under my personal name or via a limited company based on tax reasons.

While, I read posting saying a LTD is better Im confused by the fact a LTD pays CT and then to access the profits you would need to pay dividends or personal taxation on top. Surely this would equate to a greater tax burden than personal taxation alone or am I incorrect? I understand that a LTD is better if you want to retain the post tax revenues to reinvest.

thanks for reading this.

nrsql

Think this is the clearest explanation I've seen.
http://www.howardkennedy.com/articles/article26.html
It's a bit out of date now - the 10,000 exemption doesn't apply in all cases.

You don't pay the full income tax on the dividends as corporation tax has already been paid.
http://www.coddan.co.uk/s-A1-uk-income-tax.html

reddevilled

theGrinch wrote:

I want to work full time buying and selling property in the UK. Not developing, just buying and looking for a quick sale on. However, I am confused as to whether it is better to just do this under my personal name or via a limited company based on tax reasons.

While, I read posting saying a LTD is better Im confused by the fact a LTD pays CT and then to access the profits you would need to pay dividends or personal taxation on top. Surely this would equate to a greater tax burden than personal taxation alone or am I incorrect? I understand that a LTD is better if you want to retain the post tax revenues to reinvest.

thanks for reading this.

Hi,

I am busy at the moment so will quickly reply and reply further later if possible.

You are right with being concerned about the double tax problem of operating through a limited company, as you will pay CT and then potentially income tax on distribution of the profits. Whether it is better from a tax point of view is a mathematical equation largely, as you pay different CT on different profits and likewise for income tax.

Do bear in mind other factors, such as if you are a company then you have the added administrative burdons such as annual returns, accounts, corporation tax returns as well as your personal tax returns. It can however be advantageous from a borrowing point of view, although banks will often look through the "veil of incorporation" and ask that you as sole director be a guarantor on any mortgage.

Hope this helps a little, I'll try to write more later,

Red

theGrinch

thanks for the replies. The more I read about it the more complex it gets! Am I being cynical in feeling inertia is what the govt wants?

I dont mind giving the director guarantee on mortgages and I dont mind paying my share of tax, but equally, I would like to think through the structure from the outset so once its going I can get going on.

reddevilled

theGrinch wrote:

thanks for the replies. The more I read about it the more complex it gets! Am I being cynical in feeling inertia is what the govt wants?

I dont mind giving the director guarantee on mortgages and I dont mind paying my share of tax, but equally, I would like to think through the structure from the outset so once its going I can get going on.

To be honest I think you may be best of seeing an accountant with a business plan and getting them to work through the numbers. This is definately a situation where a bit of professional advise could save a lot of hassle and money. There are also a lot of variables which make it very difficult to give general advice.