Corporation tax on BTL property

Reason123

Hello


I am exploring the option for myself and 2 friends to build a portfolio of BTL properties.


We will buy the properties as a LTD company.


I believe I have accounted for all costs incl
Accountancy. Ltd Co. Set up and year end accounts
Mortgage Broker / Mortgage set up fees
Insurance
Estate agent set up / monthly management fees
Ground rent/maintainance


But I have 1 question that I cant seem to find a final answer on.


Do we pay 20% corporation tax on the difference between Rental income and Mortgage payment?


Or do we pay 20% corporation tax on the profit after accountancy/brokerage/insurance/management is paid?


Thanks

Thrugelmir

Corporation tax is paid on the net taxable profit. I use the term taxable as this can differ from the amount shown as a trading profit.

booksurr

"we" do not pay CT, the company pays CT on its taxable profits which as mentioned are not always the same as the accounting profit as some costs are handled differently for tax purposes

what is left after that has been paid can then be withdrawn by its shareholders as dividends (if the company declares one) and will be taxed as part of their personal income via their tax return

Pennywise

The total mortgage repayments aren't an expense, only the interest element.

chrismac1

The most important thing to be aware of is that companies pay corporation tax on everything, including the profit on sale of the properties as and when you do that. But the company capital gains tax 0% band is zero, not £11,100 as it is for individuals.

Because of the aggressive stance taken in recent Budgets to buy to let, it probably does make sense to buy properties now via a company. But ensure you have factored the difference in tax treatment on their final sale into your considerations.

Reason123

Thanks all - I believe I found what I was looking for.


'Allowable expenses’ like accountancy/brokerage/maintenance fees are taken as costs (along with the mortgage interest) and CT is deducted on what is left (if any profit is left) thereafter.


We wouldnt be taking any divedends from the company. We would want any remaining profit to build up / pay towards the next property.

Aquamania

Good luck securing any mortgage in the name of a newly formed limited company with, by definition, no credit history