Buy to Let via Company?

Gurj247

So the OH and I have managed to get ourselves in the position of being Mortgage Free at the end of our current contract (thanks to lots of savings etc over the last 5 years)


That being said I have paid the majority so that the OH has been able to save a decent amount.


Someone mentioned that perhaps it would be beneficial to purchase a property via a company rather than as individuals with both the OH and I being directors and taking money out of the Company over time.


Is this genuinely a sensible option?
Could you chose to leave money in the account to accumulate?
If initial money for BTL is via Director Loans - Can we take that money out sooner without being taxed?


regards


Gurj

bigstevex

You need accountant/small business advice tbh.

Put simply though, any money lent to the business as a director loan can be withdrawn tax free as it's your money.

However you'd need income first into the company so there was something to withdraw if you spent the initial loan on the deposit or cash purchase of the property.

Comms69

Why would a company be better? Sorry I just don't understand what you hope to achieve?


Sometime people set up a company in order to pay themselves the minimum and then claim dividends, but rental income is usually so low that for one property there's no benefit.

Gurj247

bigstevex wrote: »

You need accountant/small business advice tbh.

Put simply though, any money lent to the business as a director loan can be withdrawn tax free as it's your money.

However you'd need income first into the company so there was something to withdraw if you spent the initial loan on the deposit or cash purchase of the property.

Thanks, Yes will be speaking with an accountant too, just looking at all the options I guess.

Comms69 wrote: »

Why would a company be better? Sorry I just don't understand what you hope to achieve?

Sometime people set up a company in order to pay themselves the minimum and then claim dividends, but rental income is usually so low that for one property there's no benefit.

Plan would be to buys multiple properties on Buy to Let mortgages, with the income coming in to the business and then paying ourselves minimum (probably just take the director loans out when we can) and leave the rest (assuming there is some) in the account to accumulate over time and pay out dividends.

Doozergirl

The loan rates will be more expensive than personal BTL mortgages. Arrangement fees are £££

Gurj247

Doozergirl wrote: »

The loan rates will be more expensive than personal BTL mortgages. Arrangement fees are £££

Yes I have noticed that the loan rates are generally higher then personal mortgages, but that being said they are currently no higher than the mortgage I currently have (mine was signed up to 4.5 years ago on a 5 year fixed offset product).

SmashedAvacado

Depends on the value of the property - you don't want to get caught up in the rules about enveloped dwellings which attract an annual SDLT payment

You need to also think about the costs of maintaining the company and compliance - filing accounts etc.

In terms of "keeping the money in the company" - just because you have not taken the money out of the company, does not meant that the company has not made a profit, for which tax could be liable.

Loan rates and obligations can be more difficult and it is likely you will be asked to personally guarantee the loan to the company

In terms of tax, one of the things to think about could be for the profit to be paid to your pension directly by the company which would be an employers contribution and be free from tax. obviously this works if you have an appropriate pension in place, but if you dont need the cash it can be an efficient way to save into a pension.

Comms69

If you've never been a landlord, I might start with one property, not ltd company, and see how you get on.


There really is little benefit for a ltd company when first starting out; thereafter if it goes well you can sell the property to the company.

Gurj247

Comms69 wrote: »

If you've never been a landlord, I might start with one property, not ltd company, and see how you get on.

I have been managing my fathers properties for a few years, so know that at times they can be a pain in the proverbial, mainly because getting trustworthy trades people is difficult and sometimes you can get the worst tenants in the world.


But its all a risk and over the long term I still see property prices going up.