Should I put my properties in an Ltd company or keep them in my name?

Skag

I have 2 properties owned outright in my name, and my salary is 50k/year. The properties give me some extra 20k / year each, and therefore I am getting taxed 40% on them.

Is it worth issuing an Ltd and putting them in the company so that the income is getting taxed by 20%? (which I presume is the Ltd tax).

Also, how should I move if I buy a 3rd property with a BTL mortgage?

Thrugelmir

Skag wrote: »

Is it worth issuing an Ltd and putting them in the company so that the income is getting taxed by 20%? (which I presume is the Ltd tax).

The remaining money at this point is the Companies not yours though.

Skag

But the company will be mine, so effective won't that be my money as well?

cte1111

The company will be taxed on the profits. You will be taxed when you take the money out of the company.

http://www.telegraph.co.uk/finance/businessclub/11206409/How-to-legally-withdraw-money-from-your-own-business.html

chopper78

The company will be taxed on the profits at 20%, that bit is true, but then when you pull the money out as a dividend, you will be taxed at 25% of whatever you pull down, so if you pull the remaining 80% down, then 25% of that effectively means you'll be paying 40% - the same as now. From April next year, you would actually be paying dividend tax of 32.5% of that remainder, which means you would be paying MORE tax, not less.

Of course, the dividend tax is only due when you draw down the money which, of course, you do not have to do. You could leave the money in the company to invest in more property of course.

The other thing to bear in mind is when transferring property from you to your company, that could be subject to stamp duty also.

Skag

So LL don't usually follow that practice?

How about when someone works as a contractor and has his own Ltd company, but also has put his property in the Ltd.

Or the third scenario, works as a contractor and the property is in his name? I guess the tax is paid by the umbrella company or he has to declare tax on the whole of his earnings i.e. property + job?

Mrs_pbradley936

I would not put them into a company. I have looked into doing this so that I could claim back VAT on all the plumbing, agency fees etc. but in the long run not worth it. At the moment that are yours free and clear once they belong to the company you will not have control over them because the will become company assets - you owning the company will not change that.

When I needed a mortgage I had it on my own home because the loan to value ratio was far better. I had all my advice from a Barclays Premier Manager and so far it has always been very sound.

chopper78

Some people don't realise that just because they own all of the company does not mean that the things within that company are therefore theirs.

A company is a legal entity in its own right and anything of value (money, or 'benefits in kind') transferred from the company to its owner is classed as an earning and taxed accordingly.

bluesnake

If your wife is say a Monaco resident, she could set up a company there and you could manipulate your funds and claim less tax, possibly a few other tax saving methods. There is also a tax that foreign investors and non uk companies do not need to pay, not sure but think it is capital gains

If you want to know more, just google 'Philip Green'

While you are on the subject, it you did make a limited company, I always thought (possibly wrongly) transferring property to family via this method was just an allocation of shares, and also could help as a protection of assets in a divorce.

Another point is that you could make your property empire a charity. Many councils have done this to their own housing stock, and you get a tax break for donations.

It you go through the charities register, which I did a number of years ago, it was not long till an oddly worded name or two stood out. Apparently directorship also protects assets in divorce cases too.

Skag

Divorce is a very good point to raise. Thanks.

bluesnake

More than divorce, death also.