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

Borrowing against own home to buy property in a Ltd.

doobrey
Posts:5
Joined:Fri Sep 06, 2019 8:46 pm
Borrowing against own home to buy property in a Ltd.

Postby doobrey » Sun Jul 18, 2021 7:43 pm

I have got several rental properties in my own name and I think if I buy any more it should be as a Ltd company since I have just about maxed out my tax mitigation options as an individual. My own home is unencumbered. When borrowing is cheap I tend to think this is a bit of a wasted opportunity.

My idea is a personal residential mortgage with a corresponding Director's loan to transfer funds to a Ltd company to buy a property i.e.

I borrow against my PPR
I lend the released equity to my Ltd. via a Director's loan
The Ltd pays me interest at the same rate as the bank charges me
My personal taxable income from this should be zero. Mortgage interest would be tax deductible since it is for business purposes.

This would seem (on the face of it) preferable to the Ltd. company taking out the mortgage, since deals are better for individual homeowners than for companies. Would this work / make sense?

AGoodman
Posts:1274
Joined:Fri May 16, 2014 3:47 pm

Re: Borrowing against own home to buy property in a Ltd.

Postby AGoodman » Sun Jul 18, 2021 9:05 pm

You would pay income tax on the interest the company pays you but I suspect the interest you pay personally would not be deductible from that. If I'm correct, it builds in some significant tax leakage.

maths
Posts:8265
Joined:Wed Aug 06, 2008 3:25 pm

Re: Borrowing against own home to buy property in a Ltd.

Postby maths » Sun Jul 18, 2021 10:02 pm

Interest payable on a qualifying loan is deductible; a qualifying loan is one used to buy shares in or to lend money to a business in which you own more than 5 per cent of the shares

AGoodman
Posts:1274
Joined:Fri May 16, 2014 3:47 pm

Re: Borrowing against own home to buy property in a Ltd.

Postby AGoodman » Mon Jul 19, 2021 1:02 am

Fair enough.

I should caveat everything i write with "If I am correct..."!

doobrey
Posts:5
Joined:Fri Sep 06, 2019 8:46 pm

Re: Borrowing against own home to buy property in a Ltd.

Postby doobrey » Mon Jul 19, 2021 3:14 pm

Thanks both for your input.

As far as I can see, then, my idea seems valid. If anyone things otherwise please let me know.

doobrey
Posts:5
Joined:Fri Sep 06, 2019 8:46 pm

Re: Borrowing against own home to buy property in a Ltd.

Postby doobrey » Mon Jul 19, 2021 3:24 pm

* "thinks"

maths
Posts:8265
Joined:Wed Aug 06, 2008 3:25 pm

Re: Borrowing against own home to buy property in a Ltd.

Postby maths » Mon Jul 19, 2021 6:42 pm

I normally say “I’m probably wrong but my view is …….”

I now don’t do this as anyone on this site reading my comments are aware of my poor track record.


Return to “Property Taxation”