Ltd comp advantages for BTL

novazombie

I have 2 BTL`s no mortgage and have been thinking about putting them both into a LTD company.

If I sell them both to the company on an interest only mortgage (the rent coming in is about 100wk each) so 200wk income, what expenses can I claim? Is it possible to get the tax liability right down to almost nothing?

What would the tax man think about internet connection and mobile phone contract etc etc. Even thinking about leasing a small van for property maintenance? Would these be ok for expenses even for just a few properties?

crazygaijin

A good accountant will tell you many other things that you can put down.

Yes you could get it down to almost nothing, but be careful always think about can you explain if you are investigated.

Can you explain that you use your internet conection purley for the business? Same with mobile phone contract, he may also want to see your personal one as well.

I think the lease car thing would depend on how far away the properties are and how often you need to go to them for good reason.

Merlin_Accounts

Hi

Not sure if I follow why you are thinking of incorporation - not saying its wrong as in some cases it is ideal. The jist of the post seems to suggest that going Limited is what you feel you have to do to justify expenses being claimed against the rental income - this couldn't be further from the truth. You also need to consider the potential capital gains tax liabilities arising from the transfer (though doing it 1 property per tax year would go a long way to negating that risk), and then there is also the possibility that you will have stamp duty to pay on the transfers too.

I should also point out that creating a private mortgage when they are in the Ltd Company would entail registering the charge with Companies House, so I do not think you could avoid professional fees for this (you would also need to draw up a mortgage deed). Do not forget that the repayments on the mortgage are not deductible as an expense of the letting activity (unless the repayments were interest only that is). If paying interest to yourself the Ltd Co would have to stop 20% tax at source to start with, and in your hands you would not get this back if you were a basic rate taxpayer.

Maybe you need to look at why you want to go Limited first and foremost.

Mike-H_3

You may be hoping for the perfect answer, but the simple truth is that you need to get some good financial advice from an accountant or tax consultant. Company formation not be the right answer for you or it may save you money. However, make the wrong decision now and it may cost you thousands of pounds. Please speak to an accountant. Their fees will be worth it.

silvercar

Why have you got no mortgage on your BTLs?

If you took an interest only mortgage on them for their value at the time you started letting them (as this is the maximum relief allowed and I presume the rent would cover a mortgage of this size), the mortgage interest is an allowable expense. You could then invest the mortgage money and get interest on that as well as not paying income tax on the mortgage interest payments.

example. Say properties cost 100k originally, now worth a lot more. You take 100k mortgage which would cost youabout £500 a month. So now you won't have to pay tax on £500 of the rental income each month and you have 100k to (safely) invest.

stick2000

Can I suggest that you post your question on landlordzone.co.uk - with all due respect to MSE posters there are people on landlordzone that are specialised in rental properties.