This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Ltd & BTL

arjunb88
Posts:15
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:15
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:4262
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:15
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:37
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:4262
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.


Return to “Property Taxation”