Ltd co or not

[sentinal]

Hello all
Need some advice on tax and the possibility of reducing my tax bill
At present i am in the high tax bracket ( property income) and PAYE
I am being advised to set up a limited company as a possible way reducing the tax liability, also considerable more allowances are available ?
Dose this scenario ring right with anyone or am I being led down the preverbal BS road.
What are the general advantages over the disadvantages?
Furthermore is it difficult to run the said Ltd Co on property lettings,
thankful for any input in this difficult decision
kind regards

[mullet]

Whether or not you can operate through a company in terms of your "day job" very much depends on your relationship with your engager and the area of business/industry in which you operate.

If you own the property personally and wish to place it into a company, remember that this will be a disposal for capital gains tax which will crystallise a gain/loss and might give you an unexpected tax bill (and you would not have received disposal proceeds to pay the tax with). You can't just assign the property income to a company, as such income would still be taxable in your hands.

[section 44]

Remember that on a disposal of the properties you would only pay CGT, currently at rates of 18%/28%. However the company would pay corporation tax on any gain at upto 26% (20% if small companies rate applies) and you would then incur either CGT or income tax when you extract the profit from the company, potentially at up to an effective rate of 36.1%. Is there any possibility of you living in any of these properties (PPR)?

[ensigntaxation]

Hi Sentinal,

How's it going?

It would be good to get a better understanding of what you're trying to do. Are you essentially the owner of a number of investment properties? You therefore have an income stream from property lettings, and also potentially capital returns coming from the disposal of properties?

As mentioned above, owning investment property directly or through a transparent entity such as a partnership or LLP can be efficient for CGT purposes. On the other had, if you do not need to drawdown a proportion of the rental income then having the income accrue to a company may be beneficial. You could run a hybrid structure taking advantage of both.

However, would need more detail before advising on how to reduce your potential liability.

Hope that helps

Cheers
Andy