Changing from a residential to a buy to let : ltd vs under personal name

simon_or

It's not going to be worth it for a single property. Mortgage rates and fees are noticeably higher, conveyancing costs are a lot higher, getting money out of the company tax efficiently and in a compliant manner requires good knowledge or an accountant, you can't use your 12.5k+12.5k CGT allowance when you sell the property, etc.

If you are upsizing to a significantly more expensive property and thus saving yourself a large sum on SDLT at the outset then I suppose the numbers may add up in the immediate term but again probably not in the long term.

silvercar

kelster101757 said:

silvercar said:

Transferring it to a company means you are selling and the company buying it. The upside would be that you wouldn't have to pay the extra stamp duty on the new place, that you would if you kept the property and bought a new one. So immediately you are saving 3% of the new property costs.

The downside is the mortgage interest rate will be higher, but the gain is that mortgage interest is an allowable expense of the limited company. For high mortgage properties this can be a big saving. If you are not mortgaging the current property, the limited company can repay you the costs of the property tax free as the company will be repaying the director's loan that it used to buy the company off you.

There are also consideration of future tax charges on the limited company and any future gains in the property value are locked inside the company.

I would suggest an accountant could advise according to your circumstances.

Thanks for the detailed reply.  Yeah, 3% on 2nd home stamp duty is a not small money, especially if we move more than once so potentially a big saving.  Good to know about the directors loan. Thanks for pointing out the future risk, appreciate the effort to respond.  

On your second move you would be fine as you wouldn’t be increasing the number of properties you own and you would be buying somewhere that would be your residential property.

The difference in mortgage rates may not be that great. When I looked years ago, NatWest were 0.25% higher with a personal guarantee and some banking requirements