Transferring property to a limited company

anselld

Whichever you decide, do it before he completes. The benefits are marginal at best but it will certainly not be efficient to transfer at a later date.

Keep_pedalling

There are other ways of avoiding slipping into the higher tax bracket, upping his pension contributions would be a good one.

Crashy_Time

https://www.property118.com/limited-company-btl-mortgages-watch/97674/

Jojo_fry

It seems the key here is about being under the higher rate threshold, so working out what is deductible is probably going to be more helpful than the limited company idea. Given that the buying expenses should be deductible and we're already 4 months into the tax year it will probably work out ok. He will be taking 6 months paternity leave which will effectively halve his income in the next tax year so that will be ok I guess. It's what to do in the longer term which is more of a concern, as the new rules will be fully phased in by 2020.

Hoploz

Has he exchanged contracts yet? If not ... Wait. He needs to decide which way this is going to be funded before it goes through. If it is personal that's all in place, but if he has an idea to set up the ltd co then it needs to be fully researched right now. Changing it afterwards will cost money in terms of additional unforeseen costs eg mortgage redemption penalties etc. He really should have thought earlier. It's entirely possible to have a company mortgage with a personal guarantee ... but get organised before exchange.

Jojo_fry

He exchanged contracts back in October last year, the development has only just been built which is why completion is so long after exchange, so unfortunately there's nothing we can do about the current state of play. I've only just heard about the change of tax rules, bit too late really. In the absence of a time machine the issue now is finding the best way forward.

Thrugelmir

Jojo_fry wrote: »

He will be taking 6 months paternity leave which will effectively halve his income in the next tax year so that will be ok I guess.

Not helpful in terms of refinancing the borrowing.

saajan_12

Jojo_fry wrote: »

I've heard that it may make more sense to use a limited company and pay flat rate corporation tax

Company setup / admin costs and likelihood of getting funding aside, how would he (evenutally) get the rent money out of the company? If the company pays him a salary / dividend, he'd pay tax again on this (+NI considerations).. coming out equivalent to paying 40% in the first place.

qwert_yuiop

Anyone using a mortgage in the buy to let game who's not rich is taking a major risk, and needs to be sure they can cope with void periods. Interest rates will go up at some point. Rents and house prices can go down. Have they costed for this? This could all go horrible.

The changes were flagged well before October.

Crashy_Time

saajan_12 wrote: »

Company setup / admin costs and likelihood of getting funding aside, how would he (evenutally) get the rent money out of the company? If the company pays him a salary / dividend, he'd pay tax again on this (+NI considerations).. coming out equivalent to paying 40% in the first place.

Too much hassle for Average Joe, many will just sell up, which is what the government want them to do.