Set up LTD company for 2nd property or not?

Newheight13

Hi,

My wife earns 49k and I earn 24k. If we were to do a BTL with an gross annual rental income of 12k a year would we be better setting it up as a limited company? My understanding is the income would be be a 50/50 split bringing her 6k into the 40% tax bracket?

Thanks 

anselld

It is not worthwhile going LTd unless you are higher rate tax payers *and* you want to leave the income inside the Company long term to grow a larger portfolio.
In your situation (unless this is the start of something much bigger) it would be better to own the property in unequal shares, eg 90:10 such that you can use your remaining lower rate tax band.  Submit form 17 to HMRC once the ownership % is established.

_Penny_Dreadful

Newheight13 said:

Hi,

My wife earns 49k and I earn 24k. If we were to do a BTL with an gross annual rental income of 12k a year would we be better setting it up as a limited company? My understanding is the income would be be a 50/50 split bringing her 6k into the 40% tax bracket?

Thanks 

You can split the income anyway you like with a deed of trust altering the beneficial ownership. You could split it 99:1 if you wanted. 

If you keep the split 50:50 then yes that £6k rental income would mean that her income above £50,271 would be subject to the higher rate. 

Limited companies are subject to different taxes depending on how you choose to extract the money e.g. dividends and there are costs associated with setting up and maintaining a limited company. Plus mortgages for limited companies are usually more expensive. It’s not a simple case of saying one option is better than the other you need to consider you’re own specific circumstances and long term goals. 

If this is the £220k property in your other thread then that’s not a great gross rental yield considering you’ve got 3 year fixed bonds offering 4.45% at the moment and index trackers you can hold inside your S&S ISA both of which come without the same rafts of legislation landlords must comply with. I know landlords in England are getting twitchy about the Renters Reform Bill, Patrick Harvie is making an !!!!!! of the PRS in Scotland and the less said about the Senedd’s roll out of these new occupation contracts the better. I’m not saying don’t invest in BTL, I’m saying do your homework. 

prowla

Who would the property belong to - the people or the company?