BTL - Tax - Management company

gizmos

Bear with me here to describe scenario.

Currently have 2 BTL property, soon to be 3. Rents on all 550 pm
All will have Interest on,y mortgage of circa 120 pm, insurance 12 pm and maintenance of 60 pm
Am also a higher rate tax payer
I self manage the properties at present.

Obviously with the cuts to mortgage relief am looking st says to reduce tax bill.

Thought is to create a Management company (all above board via companies house) and charge myself th going rate for area to do this.

Well aware there are implications and need to audited accounts etc. However I’d save the 12% as that’s the fees, so manage,ent company would have these in their bank and could take £2k as a directors dividend.

For anyone wondering this is NOT tax evasion, more avoidance.

00ec25

so the company income will be £2,376 pa
deduct company admin costs ? bank charges, £13 Companies house fees, accounts work?
deduct 19% corporation tax

your post tax distributable reserve will not be £2k !

no other dividend income (outside an ISA obviously)? So the dividends could be free of personal tax?

gizmos

00ec25 wrote: »

so the company income will be £2,376 pa
deduct company admin costs ? bank charges, £13 Companies house fees, accounts work?
deduct 19% corporation tax

your post tax distributable reserve will not be £2k !

no other dividend income (outside an ISA obviously)? So the dividends could be free of personal tax?

Sorry originally looked at 15% and did some “back of enveloped” figures on that.

And can offset the 2,376 on self assessment form as well as it’s a legit expense, hence lowering that bill too.

No other dividends at all, the properties are my investments.

tebthereb

Is there a question here?

The proposed setup is possible but obviously with related party transactions comes a risk of scrutiny from HMRC so care would be needed.

My concern would be whether the tax saved is more than the costs of having a company which carries a certain amount of obligations for the company (and you as director) and thus (usually) a fair amount of costs. That will be a case of crunching the numbers.

I would be thinking about incorporating a company and putting the properties there, personally. There are a number of factors here and it shouldn’t be undertaken lightly or without professional help but it is possible to do it without tax charges.