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Ltd & BTL

arjunb88
Posts: 13
Joined: Thu Mar 02, 2017 6:55 pm

Ltd & BTL

Postby arjunb88 » Thu Apr 20, 2017 11:05 pm

I am considering helping a family member who's marriage is dissolving. It's a complicated case involving children. The crux is they need to sell the property. But I am trying to help them stay in a house as whatever family is left. I however cannot purchase as a residential property as I have a mortgage.

I am considering incorporating a Ltd company with 3 members. Myself higher rate tax payer and two low rate tax payers. No annual salaries from the ltd.

This will be used as a vehicle to purchase the property as a btl.

I was hoping to understand a little more about Ltd vs personal.

I expect an income of 1300 pm rental from the family who will remain there.

Thus £15,600 per year. I understand this will be taxed at 20% corporation tax. Can somone explain what benefit that is against the fact you cannot offset tax on the interest payments anymore?? Never quite understood that

I assume this means £3120 tax leaving £12480 in the Ltd company. Instead of ?? If not in a Ltd company?

Can that £12480 be removed as dividends if split less than £5000 per year per director (of which there will be 3) without tax implications against it?

arjunb88
Posts: 13
Joined: Thu Mar 02, 2017 6:55 pm

Re: Ltd & BTL

Postby arjunb88 » Thu Apr 20, 2017 11:11 pm

Apologies. Lastly can I offset The mortgage interest payments against the monthly rental income in the ltd?

I.e. rental comes in at 1300pm. Mortgage interest payments are £1000. £300 is therefore profit.

This £3000 annual profit removed as dividend tax free according to the £5000 rule.

Does this mean that if I pay mortgage of interest only. I.e. £1000 from the Ltd company account to the mortgage company. This is what the offsetting means?

bd6759
Posts: 2063
Joined: Sat Feb 01, 2014 3:26 pm

Re: Ltd & BTL

Postby bd6759 » Sat Apr 22, 2017 11:31 am

If you are unable to obtain a mortgage personally, there is little chance that a newly formed company will be able to otain a mortgage either.

arjunb88
Posts: 13
Joined: Thu Mar 02, 2017 6:55 pm

Re: Ltd & BTL

Postby arjunb88 » Sun Apr 23, 2017 8:51 am

Hi,

I cannot obtain another residential mortgage as I have one already. So would need to obtain a btl mortgage. This would increase the interest rate considerably. Therefore the reason I am trying to understand the above. As r3ally this is not a moneymaking venture, even though it will be let to the family member I am considering to buy it from. Any help or idea on the questions I had?

Thanks

Martintaxes
Posts: 3
Joined: Fri Apr 28, 2017 12:25 pm

Re: Ltd & BTL

Postby Martintaxes » Sun Apr 30, 2017 3:47 pm

Hi,
If you have equity in your existing residential mortgage you can take out new loans against it at potentially favourable rates. I have 3 BTL mortgages on the back of my main mortgage. Even with a high LTV the rates are very good at the moment. My bank couldn't care less what I used the money for and didn't force me down a BTL mortgage route.

navyreg1970
Posts: 3
Joined: Thu May 11, 2017 5:48 pm

Re: Ltd & BTL

Postby navyreg1970 » Thu May 11, 2017 6:38 pm

if the ltd company buys the property does It still have to pay Stamp Duty Land Tax , its quite confusing - one site I looked at said that SDLT is only payable if the Ltd company receives a property as a gift from a major shareholder or buys a property from a major shareholder - that suggests if the Ltd company buys the property from open market as an asset to the business the SDLT may not be payable?

bd6759
Posts: 2063
Joined: Sat Feb 01, 2014 3:26 pm

Re: Ltd & BTL

Postby bd6759 » Thu May 11, 2017 11:13 pm

A company pays SDLT on land transactions. It is also liable to the additional 3% rate above the ordinary rate if it buys a residential property.

The website probably said that if a company gets a property from a connected person, the SDLT is based on the market value, not the actual amount paid.


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