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

Innys1

chopper78 wrote: »

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.

This is only the case for the excess dividends over £5k, assuming the OP has no other dividend income. The dividends up to £5k are free of all taxes.

So,the tax on the excess dividends is £4,875 - making an effective tax rate of 25%, or so on that source of income. Far better than the 40% the OP is paying now.

kinger101

Your tax planning came too late. You'll trigger both SDLT and CGT when you transfer the properties to a company. You need professional taxation advice on this, as there are pros and cons of this. It largely depends on what your investment strategy is. From April 2016, I think you can received £5000 of dividend without further tax. After that, you pay tax at the marginal rate (and the 10% notional tax credit is being scrapped).

So it really only makes sense to do this if you are receiving <£5K dividends, and the remainder is being reinvested. You then have to think about additional compliance costs. Companies House. Corporation Tax returns.

Mrs_pbradley936

I forgot to say that my accountant said he would have to charge a very great deal more if he had to sort out VAT and everything else company accounts entail.

bluesnake

There is a loophole the contractors and businesses use. It goes something like this, but it is not my game and do not know the exact rules.

If you wait around 2 years you dissolve the company in a certain way, you pay 12%? (or so tax) and walk away with the rest, then start another company.

kinger101

bluesnake wrote: »

It goes something like this, but it is not my game and do not know the exact rules.

And yet you're still dishing out "tax advice".

kinger101

Mrs_pbradley936 wrote: »

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.

Operating a a company does not mean you can claim back VAT.

Thrugelmir

kinger101 wrote: »

Your tax planning came too late. You'll trigger both SDLT and CGT when you transfer the properties to a company. You need professional taxation advice on this, as there are pros and cons of this. It largely depends on what your investment strategy is. From April 2016, I think you can received £5000 of dividend without further tax. After that, you pay tax at the marginal rate (and the 10% notional tax credit is being scrapped).

So it really only makes sense to do this if you are receiving <£5K dividends, and the remainder is being reinvested. You then have to think about additional compliance costs. Companies House. Corporation Tax returns.

Safe to assume that the July changes are only the first of many which will address the issue of a level playing field.

chopper78

bluesnake wrote: »

If you wait around 2 years you dissolve the company in a certain way, you pay 12%? (or so tax) and walk away with the rest, then start another company.

Provided the total assets of the company (cash and property) are less than £25,000, then you would pay 10%. If the total assets are more than £25,000, you would pay the full 40% on the lot - including 40% tax on the value of the property.

Contractors do the MVL route when they have under £25k of cash and are no longer trading.

Innys1

kinger101 wrote: »

Operating a a company does not mean you can claim back VAT.

True, but the company often can. Which then, the principal shareholder can then take out of the company in the form of dividends.

bluesnake

kinger101 wrote: »

And yet you're still dishing out "tax advice".

I have worked with may high earners - many over 100k, ok that may not be high to you. No, I am not one of those. Yes it is 'tax advice' in the loosest sense of the word.

Secondly it is a forum, containing a collection of ideas, methods, and some possibly unknowingly outdated information, sounds like you may not have grasped this idea yet?

I do not know, or know of you, but I do bow down to your superior tax knowledge.

I believe no one any reads any web page, and thoughtless actions anything blindly without any professional advice.