Buy to let through Ltd

Greymug

Hello, I'm tinkering with the idea of getting a buy to let property.

From the limited amount of research I've done, it seems like the way to go for me would be to set up an Ltd and buy/manage everything regarding the property via my Ltd.

I'm looking to learn more from whoever in this forum has done the same and bought a property using their Ltd. What are the clear and less clear advantages/disadvantages that internet doesn't tell you about?

Anything I should take into consideration?

The more info, the better. Thanks.

theartfullodger

Great idea: What assets & income does/will the Ltd company have to show the lender it's a safe bet to lend that Ltd Co say £100k, £200k please??

Would you be happy to sign a personal guarantee to cover the obviously very unlikely possibility of the company not paying please??

Suggest you talk to a mortgage broker specialising in mortgages for companies: Actually on reflection the directors of the company should talk to.....

Is your ain in wanting to go the Ltd co route to pay less tax than other people, please?

Schwarzwald

Speak to your tax advisor to understand all implications, incl ongoing running costs.

i looked at it last year myself, one conclusion which i guess holds in general: Ltd route makes only sense if you aim to build a portfolio. Would doubt it makes sense for only 1 property give additional costs

anselld

Read "Using a Property Company to Save Tax" by Carl Bayley.
You will find the "Save Tax" bit is by no means guaranteed; it is marginal at best by the time you have extracted income from the Ltd Co.
The main scenario where it is beneficial is where you are already a high rate tax payer AND you intend to retain profits inside the Co for the long term to grow a portfolio.
It can also be beneficial for people who already have significant cash tied up in a Ltd Co with tax implications of withdrawal, eg Consultants/Contractors employed through Ltd Co.

Greymug

anselld said:

Read "Using a Property Company to Save Tax" by Carl Bayley.
You will find the "Save Tax" bit is by no means guaranteed; it is marginal at best by the time you have extracted income from the Ltd Co.
The main scenario where it is beneficial is where you are already a high rate tax payer AND you intend to retain profits inside the Co for the long term to grow a portfolio.
It can also be beneficial for people who already have significant cash tied up in a Ltd Co with tax implications of withdrawal, eg Consultants/Contractors employed through Ltd Co.

Exactly this, you sum up my position very well.

I am a high rate tax payer
I intend to keep the income from rental and profits inside the Ltd for the mid-long term 
I intend to eventually buy more buy-to-let properties

So Ltd way sounds like the way to go for me. Thanks, I'll read the resource you mentioned.

2bFrank

I was looking into this myself, I am a contractor who works through a limited company, so already have a lot of the infrastructure in place.

If you have the deposit (you need 25%), you need to put into the company, the money is now the companies (you cannot loan it as you wont get the mortgage). Getting the mortgage is pretty much the same as a personal BTL, although if you have no trading history you will need to personal guarantee it.

Your main issue, is now the property is the companies, and you need to manage the property on behalf of the company. This means all income belongs to the company and you need to pay yourself in dividends (or wage but this wouldn't be tax efficient), you also need a good accountant.

When you actually sell the house, the money will be the companies, and its very difficult to extract such a large amount (presuming you made a good profit) in a tax efficient way.

If you already running a company, I think it is a very good way of doing it, however if you are just setting up the company just to buy one property, I think its expensive (you will spend more on accountants etc than you will save in tax) plus all the extra paperwork will make it very time consuming. 

Greymug

2bFrank said:

I was looking into this myself, I am a contractor who works through a limited company, so already have a lot of the infrastructure in place.

If you have the deposit (you need 25%), you need to put into the company, the money is now the companies (you cannot loan it as you wont get the mortgage). Getting the mortgage is pretty much the same as a personal BTL, although if you have no trading history you will need to personal guarantee it.

Your main issue, is now the property is the companies, and you need to manage the property on behalf of the company. This means all income belongs to the company and you need to pay yourself in dividends (or wage but this wouldn't be tax efficient), you also need a good accountant.

When you actually sell the house, the money will be the companies, and its very difficult to extract such a large amount (presuming you made a good profit) in a tax efficient way.

If you already running a company, I think it is a very good way of doing it, however if you are just setting up the company just to buy one property, I think its expensive (you will spend more on accountants etc than you will save in tax) plus all the extra paperwork will make it very time consuming. 

Thanks for your insights. Very useful.

I did have a Ltd company when I was an IT contractor, too bad I closed it after I went back to permanent employment. If only had I known...

Sounds like I need an accountant more than I need a mortgage broker

K_S

2bFrank said:

If you have the deposit (you need 25%), you need to put into the company, the money is now the companies (you cannot loan it as you wont get the mortgage).

For the benefit of others who may come across this thread - I just want to point out that it is indeed possible to get a ltd.co.BTL mortgage where the source of deposit is a loan from the Director. In fact it's one of the more common ways to fund a deposit for a newly set up limited co SPV. and there are plenty of lenders that will consider.

anselld

Relating to the last three posts, a property SPV is normally recommended even where there is already a Ltd Co in place for other reasons.  This is partly because there is a distinction between trading companies and investment (property) companies and it is best not to mix the drinks!

Also property in an SPV can be disposed by selling the SPV rather than the property itself which is more tax efficient.

2bFrank

K_S said:

2bFrank said:

If you have the deposit (you need 25%), you need to put into the company, the money is now the companies (you cannot loan it as you wont get the mortgage).

For the benefit of others who may come across this thread - I just want to point out that it is indeed possible to get a ltd.co.BTL mortgage where the source of deposit is a loan from the Director. In fact it's one of the more common ways to fund a deposit for a newly set up limited co SPV. and there are plenty of lenders that will consider.

Ah my apologies, was a few years ago when I was looking at this, I was told that it cannot be a directors loan (to the company) for the source of deposit, seems this was incorrect