Ltd company to avoid SDLT?

adonis10

tired_dad wrote: »

8k is nothing. All these big tax avoidance games are best left to serious players for whom it is a game, and any later fine etc would just be loose change. If your going to pay £500k in SDLT it might be worth seeking professional advice.

Do what you want but ask yourself a simple question. Could you easily afford extra taxes or fines if things did not work?

8k isn't "nothing", but I get your point. Perhaps, if I wish to rent out my flat, I need to just suck it up. As a proportion of a 300k house, it is relatively minor. However, that's 8k of extra mortgage with compound interest, so it isn't just 8k.

There is talk of being able to claim it back if the property is sold within 18 months, correct? Or it HAS to be claimed within the 18 months? May just rent it for 12 months, see how it has gone being a landlord, consider how lucrative it has been (if at all), see what other tax grabs on landlords are put in place and make a decision whether to stick with it or sell.

Savvy_Sue

adonis10 wrote: »

May just rent it for 12 months, see how it has gone being a landlord, consider how lucrative it has been (if at all), see what other tax grabs on landlords are put in place and make a decision whether to stick with it or sell.

One contra argument to that is that if taxes make lettings less lucrative to landlords in the future, you and many others may put your properties up for sale at the same time.

Personally, if I thought I could get a good price for it now, I'd sell, pay the tax, and live happily without the responsibilities of being a landlord. That is not for the faint-hearted either!

adonis10

Savvy_Sue wrote: »

One contra argument to that is that if taxes make lettings less lucrative to landlords in the future, you and many others may put your properties up for sale at the same time.

Personally, if I thought I could get a good price for it now, I'd sell, pay the tax, and live happily without the responsibilities of being a landlord. That is not for the faint-hearted either!

You make a good point; had a valuation of 199.5k last week, but I fear this will plummet once the inevtiable flat sell off happens when the effects of this tax grab kick in.

If I sell now, there is no tax to pay. Also, I believe that if I buy and pay the extra SDLT, I can reclaim it if I sell the current flat within 18 months. So we could buy, take the hit, get it up for sale and then reclaim the excess SDLT. However, already having a mortgage would be troublesome as we want to fix for 5 years so wouldn't be able to pour a lot of the cash into the property. I'd be lumbered with ~190k earning sweet fa in interest.

Savvy_Sue

Being a bear of small brain, I'd make a decision about this, act on it and try never to think again of whether or not I'd made the RIGHT decision!

grey_gym_sock

adonis10 wrote: »

However, already having a mortgage would be troublesome as we want to fix for 5 years so wouldn't be able to pour a lot of the cash into the property. I'd be lumbered with ~190k earning sweet fa in interest.

i may be misinterpreting, but that remark gives the impression that property and cash are the only options. and they are only options that many ppl are comfortable with. but what about shares and bonds?

adonis10

grey_gym_sock wrote: »

i may be misinterpreting, but that remark gives the impression that property and cash are the only options. and they are only options that many ppl are comfortable with. but what about shares and bonds?

Only ones that I know enough about. I've never had the resources to need to know in depth about stocks and bonds. I'd have to spend a lot of time learning about it all before committing to it, particularly given the current volatility in the markets. Unless you're one of the very few pulling the strings of the whole thing, it's all a bit of a very big roulette table, it seems.

grey_gym_sock

adonis10 wrote: »

Only ones that I know enough about. I've never had the resources to need to know in depth about stocks and bonds. I'd have to spend a lot of time learning about it all before committing to it, particularly given the current volatility in the markets. Unless you're one of the very few pulling the strings of the whole thing, it's all a bit of a very big roulette table, it seems.

you do need to know a certain amount before it's sensible to commit. but not that much, and it can be very hands-off once you've set something up. basically, similar returns to property (could be more or less, in different periods), but much less effort.

http://monevator.com/category/investing/passive-investing-investing/ is probably a good place to start.

it's not like roulette if you approach it sensibly. it can be if you don't, e.g. try and buy and sell shares very frequently.

adonis10

grey_gym_sock wrote: »

you do need to know a certain amount before it's sensible to commit. but not that much, and it can be very hands-off once you've set something up. basically, similar returns to property (could be more or less, in different periods), but much less effort.

http://monevator.com/category/investing/passive-investing-investing/ is probably a good place to start.

it's not like roulette if you approach it sensibly. it can be if you don't, e.g. try and buy and sell shares very frequently.

Thanks, will have a read.

I think my main reluctance is the fact that the rental income would pay my mortgage which would be of great help in the shorter term; putting 180k ish into stocks will more than likely pay off long term, with reinvested dividends etc., but no help to the monthly mortgage payments.

However, I am concerned about the value of the flat dipping when the effects of this, and further, tax grabs take hold.

Savvy_Sue

adonis10 wrote: »

I think my main reluctance is the fact that the rental income would pay my mortgage which would be of great help in the shorter term;

only when you have a tenant ...

You will have to spend money before you get a tenant, even if the flat and the furniture are in showroom condition - gas and electrical safety checks, probably installing smoke alarms, setting up tenancy agreements, finding tenants, and probably a whole load more.

Is the flat in an area where good tenants are easy to find?

As ever, your decision, but I've heard too many stories of rented flats where the landlord just doesn't seem to 'get' that they have legal responsibilities or want to put any effort into maintaining them ... or spend anything when things go wrong!

adonis10

Savvy_Sue wrote: »

only when you have a tenant ...

You will have to spend money before you get a tenant, even if the flat and the furniture are in showroom condition - gas and electrical safety checks, probably installing smoke alarms, setting up tenancy agreements, finding tenants, and probably a whole load more.

Is the flat in an area where good tenants are easy to find?

As ever, your decision, but I've heard too many stories of rented flats where the landlord just doesn't seem to 'get' that they have legal responsibilities or want to put any effort into maintaining them ... or spend anything when things go wrong!

Yeah, true, but it is very 'rent-able' flat. I've decided that, to begin with at least, to use a lettings agent to deal with all of that. Smoke alarms are already there and I'll have time to get all the checks done whilst my house purchase (when we find somewhere) is going through.

It is in a very good area which is a stones throw from the town centre, language schools, train and coach station and it is generally a very nice area, so I would be incredibly surprised if I could not let it out to decent, professional tenants. I could afford the mortgage payments without rental income so a month or two finding the right tenants wouldn't bankrupt me.

I appreciate that there is a lot to consider but there seems to be so much doom and gloom around being a landlord - surely it has its benefits otherwise noone would do it.

Annual income net of all expenses (management fees, maintenance, ground rent, repairs estimate, income tax) would be around 6k, which is around 3.2% on the capital value (est. 190k) so it is not ground breaking stuff, but still far better than bank savings interest.