Set up Ltd company to let out property?

Dagorlad73

Are there benefits of setting up my own property management company (Ltd) to let out my property?

I was thinking of setting up my own property management company (private Ltd) as a potential way of reducing my tax liability on rental income from letting out my property. The company would earn all the rental income, settle fees, claim tax deductions, etc., and I would then extract the remaining profit in dividends to me.

My situation: higher-rate taxpayer (employed), moving home, wanting to let out my old flat.

BUT, from looking at the combination of the corporation tax (20%) the company would have to pay on the profits and then the tax on the dividends that I would have to pay (effectively 25%, after deducting tax credits), it works out to exactly the same loss to taxes (40%) as if the rental income was simply paid straight to me (without going via a company). The same principle applies if I were a basic rate tax-payer.

Is this correct or am I missing something?

Are there other benefits to setting up your own management company for letting out property that I am overlooking? Is there some sort of work-around with fees that I would charge myself?

(I'm not talking about a company that would actually own the property itself, I can't do that because my property is still mortgaged)

Any general advice on this situation?

HappyMJ

The company would have to own the property that is being let out. If you were to do it tax efficiently you would be borrowing money but still have to give a personal guarantee on any money lent to the company from any banks or they just won't lend.

Just let out your flat as normal and claim the income and expenses on your own personal tax return.

Suarez

You can retain the profit in the company then draw it out when are earning less or retiring.

laurel7172

There are lots of ways to mitigate CGT on a flat that has been your home.

Not if it belongs to a company, though.

Conrad

No lender will allow the property to be held in a company name so unless you own the property outright, it's a non starter.

There are pension arrangments known as SIPPS where someone with a few properties can gain certain tax advantages, but this wont apply in your case here.

Dagorlad73

Many thanks for the advice; it's good to find confirmated that I'm not missing a trick here somehow.