personal vs ltd company mortgage

matiz303

Hi,

I am planning to invest in a buy to let house in East London. With the recent tax changes i have been thinking if I should set up a Ltd company for this buy to let investment ? I created an excel sheet to compare the benefits of paying less tax via a Ltd company route vs the excess interest which I would need to pay. I have the excel sheet on dropbox which I can share but the forum does not let me share the link

Based on this calculation it seems that I might be better off using a personal mortgage (even though I am a 40% tax payer) as the excess interest outweighs the saving in tax via the ltd company route. I just wanted to know what others think

Thanks in Advance for any help

silvercar

Tax on profits vs personal tax?

Interest rates shouldn't be that much higher for a ltd company, you may need to find a different lender.

matiz303

Below is the model I have used (copied data from my excel sheet) for the calculations. please let me know what you think

Sample calculation (based on my assumptions)

All the values in Sterling £

Property price - 330000

75% LTV
a. Mortgage : 247500
b. Stamp Duty : 16400
c. Conveyancing : 1200
d. Personal Mortgage Interest Rate : 2.49%
e. Personal Mortgage Interest paid / year : 6162.75
f. Personal Mortgage and arrangement fees (2 years) : 1995
g. Personal Mortgage and arrangement fees / year : 997.5
h. Mortgage via Ltd Company route Interest rate : 3.65
i. Mortgage via Ltd company route interest / year : 9033.75
j. Mortgage via Ltd company route Mortgage and arrangement fees / 2 years (1.5%) : 3712.5
k. Mortgage via Ltd company route Mortgage and arrangement fees / year : 1856.25

l. Rent : 1400 / month
m. Annual Rent : 15400
n. Expenses : 3080 (20% of rent)

o. Personal Mortgage based Tax : 3695.45 ((40% of (Rent - Expenses) - (20% of the e))
p. Limited Company based Tax : 657.25 (20% of (Rent - expenses - i))
q. Tax Benefit in Ltd Company mortgage : 3038.2
r. Mortgage related loss in Ltd Company mortgage : 3729.75 ((i-e) +(k-g))
s. Overall Profit / loss with Ltd Company model : -691.55