BTL limited company set up

[Alpinestars]

So said:

Can I just point out this:

The government has shafted a great many experienced landlords with their tax changes. The target was the small time and highly geared amateur, but a lot of genuine and good landlords have been impacted.

The exclusion of companies from the tax changes has meant that many inexperienced BTL investors are setting up as companies. So, some complete amateurs are set to do better than proper landlords.

Expect to see the government attacking BTL companies in due course.

Public Benefit Infrastructure Companies (of which companies owning BTLs can be) are specifically exempt from the corporate interest restriction rules, so it's unlikely that this will be reversed in the short term (subject to a change of government etc etc).

[So]

Alpinestars said:

So said:

Can I just point out this:

The government has shafted a great many experienced landlords with their tax changes. The target was the small time and highly geared amateur, but a lot of genuine and good landlords have been impacted.

The exclusion of companies from the tax changes has meant that many inexperienced BTL investors are setting up as companies. So, some complete amateurs are set to do better than proper landlords.

Expect to see the government attacking BTL companies in due course.

Public Benefit Infrastructure Companies (of which companies owning BTLs can be) are specifically exempt from the corporate interest restriction rules, so it's unlikely that this will be reversed in the short term (subject to a change of government etc etc).

It means nothing,

Legitimate business costs have always been allowable for tax purposes. Now they aren't. Expect the government to do whatever they think necessary to be re-elected.

[Alpinestars]

So said:

Alpinestars said:

So said:

Can I just point out this:

The government has shafted a great many experienced landlords with their tax changes. The target was the small time and highly geared amateur, but a lot of genuine and good landlords have been impacted.

The exclusion of companies from the tax changes has meant that many inexperienced BTL investors are setting up as companies. So, some complete amateurs are set to do better than proper landlords.

Expect to see the government attacking BTL companies in due course.

Public Benefit Infrastructure Companies (of which companies owning BTLs can be) are specifically exempt from the corporate interest restriction rules, so it's unlikely that this will be reversed in the short term (subject to a change of government etc etc).

It means nothing,

Legitimate business costs have always been allowable for tax purposes. Now they aren't. Expect the government to do whatever they think necessary to be re-elected.

I'll bow to your superior knowledge.

[Jockman]

Alpinestars said:

I'll bow to your superior knowledge.

Nope.

[kurt535]

Ive got a BTL Ltd company and properties in my own name. it was such a frikkin '6 of one half a dozen of the other' tax wise, i decided to bite the bullet and split the portfolio down the middle.

I am lucky I don't have to borrow when i buy property but my investigations of borrowing against the ltd company portfolio really surprised me how greedy the mortgage lenders are.

If you need to borrow, ltd way to go except if you have a child to hand down to, unless the company can evidence active 'reforms/building', you end up getting stuffed for other taxes as its seen as only a holding company for properties. Again, Ive just gone through this writing my will to leave everything to my son and wife and really got sent to sleep trying to understand the rules!!

And I fear what's good today will change in a year!

[mikeh501]

Hi kurt, thanks for replying. Some first hand experience is great!

Just picking apart what you said. You said you didnt need to borrow against the LTD company. What do you mean by greedy mortgage lenders? did you get some quotes?

then you said, that if you need to borrow - then LTD is the way to go? how come?

id not got as far as thinking about handing it down, but isnt it just a matter of ensuring your spouse/kids whomever are shareholders way in advance?

[kurt535]

mikeh501 said:

Hi kurt, thanks for replying. Some first hand experience is great!

Just picking apart what you said. You said you didnt need to borrow against the LTD company. What do you mean by greedy mortgage lenders? did you get some quotes?

then you said, that if you need to borrow - then LTD is the way to go? how come?

id not got as far as thinking about handing it down, but isnt it just a matter of ensuring your spouse/kids whomever are shareholders way in advance?

I toyed with borrowing against the ltd company portfolio to do more projects. sadly the range of mortgages available were limited and really expensive to set up and pay. however, mortgages within a company can write off the interest payment of the mortgage against tax whereas if you have a btl mortgage in the individual name, they are stopping you writing the interest off against profits.

[Eric Mc]

kurt535 said:

I toyed with borrowing against the ltd company portfolio to do more projects. sadly the range of mortgages available were limited and really expensive to set up and pay. however, mortgages within a company can write off the interest payment of the mortgage against tax whereas if you have a btl mortgage in the individual name, they are stopping you writing the interest off against profits.

Not quite. They are RESTRICTING the tax relief on the interest (and other finance costs) to the taxpayer's basic rate of tax which is, of course, 20%.

There are no such restrictions for a limited company - but don't forget, limited companies now only pay Corporation Tax at 19% anyway.

[kurt535]

Eric Mc said:

kurt535 said:

I toyed with borrowing against the ltd company portfolio to do more projects. sadly the range of mortgages available were limited and really expensive to set up and pay. however, mortgages within a company can write off the interest payment of the mortgage against tax whereas if you have a btl mortgage in the individual name, they are stopping you writing the interest off against profits.

Not quite. They are RESTRICTING the tax relief on the interest (and other finance costs) to the taxpayer's basic rate of tax which is, of course, 20%.

There are no such restrictions for a limited company - but don't forget, limited companies now only pay Corporation Tax at 19% anyway.

Eric the tax relief on interest is going to be phased out completely, we all know this. very challenging time for a lot of investors i fear.

[Jobbo]

kurt535 said:

Eric the tax relief on interest is going to be phased out completely, we all know this. very challenging time for a lot of investors i fear.

Where do you get this from? It's being phased down to basic rate relief only over 4 years, but there's no statement or policy on what will happen after 2021.

[olivebrown]

You mentioned investing in commercial, perhaps look at utilsing a pension co i.e SIPP. Seems to be the flavour of the month.

[kurt535]

Jobbo said:

kurt535 said:

Eric the tax relief on interest is going to be phased out completely, we all know this. very challenging time for a lot of investors i fear.

Where do you get this from? It's being phased down to basic rate relief only over 4 years, but there's no statement or policy on what will happen after 2021.

prepare for the worst, we fear. im in a landlord group thats got a taxation 1/2 day workshop coming up on expected changes and ways to limit the hits. ill try to remember to write up what i glean for everyone.

[Jobbo]

kurt535 said:

prepare for the worst, we fear. im in a landlord group thats got a taxation 1/2 day workshop coming up on expected changes and ways to limit the hits. ill try to remember to write up what i glean for everyone.

So it’s your fear, not articulated by anyone else?

Hey Chicken Little, make sure you wear a hat

[trowelhead]

I have a similar setup

But i lend money directly from trading company to property company (inter company loan)

Getting mortgages has been no problem, plenty of lenders and more joining the space. Personal guarantees on all and lots of paperwork.

No lender so far has had any issue with inter company loan or even asked about it.

Rates i have are fairly high, 3.7% on a 5 year fix single let for example, and 4.2% on a multi unit block of flats 5 year fix etc.

[kurt535]

Jobbo said:

kurt535 said:

prepare for the worst, we fear. im in a landlord group thats got a taxation 1/2 day workshop coming up on expected changes and ways to limit the hits. ill try to remember to write up what i glean for everyone.

So it’s your fear, not articulated by anyone else?

Hey Chicken Little, make sure you wear a hat

ou

ah, excellent - do you have your nuts on the line in property investment portfolios too? if so, can you add anything to the mix please that's useful? every little helps

[Jobbo]

kurt535 said:

u

ah, excellent - do you have your nuts on the line in property investment portfolios too? if so, can you add anything to the mix please that's useful? every little helps

My BTL is in a company, so no - I’m not exposed in the same way.

If you think tax relief on interest will be removed entirely, which I guess could be justified by the government on the grounds of making a level playing field for homeowners and investors, then wouldn’t everyone just buy their investment properties in companies? It would be counter-productive because I think a company works best for long-term holding for income; getting your money out after gains is not tax efficient. The effect would be to reduce turnover and thus supply of housing stock more, which wouldn’t do anything to help first time buyers.

That’s why I don’t think they’ll do anything more than fiddle around the edges. Conceivably, reducing CGT on sale of a BTL might encourage landlords to sell but I doubt that’ll happen.

Edited by Jobbo on Sunday 11th February 08:31

[Eric Mc]

kurt535 said:

Eric the tax relief on interest is going to be phased out completely, we all know this. very challenging time for a lot of investors i fear.

Is that a fact or a guess?

[DJMC]

Could I ask a few questions?...

1/ Is it the case that nowadays a BTL investor with, say, 25 properties is somehow restricted from mortgaging any further in their personal name and may be forced to create a Ltd. Co. to buy any more with a mortgage? If so, why is this?

2/ Are BTL LTVs restricted for Ltd. Co's. more so than for personal BTL buyers, or vice versa? Are interest rates the same for both classes of buyer, or does one pay more than the other?

3/ CGT - What is the best way out of BTL other than triggering a CGT charge on sale - If you take the properties to the grave, will CGT become payable by your beneficiaries on the receipt of the inherited properties, or if the estate sells them is CGT payable or does IHT overtake this if above the deceased's allowance?
What is the advantage of dying with your BTLs inside a Ltd. Co.?

Thanks for any answers.

[Yipper]

Buy-to-let net investment has collapsed -80% in the past 2 years in the UK. With falling tax relief, rising stamp duty, rising interest rates, Wall Street peak and imminent Brexit, you'd have to be mental to be chasing the BTL market right now.

[So]

DJMC said:

Could I ask a few questions?...

1/ Is it the case that nowadays a BTL investor with, say, 25 properties is somehow restricted from mortgaging any further in their personal name and may be forced to create a Ltd. Co. to buy any more with a mortgage? If so, why is this?

2/ Are BTL LTVs restricted for Ltd. Co's. more so than for personal BTL buyers, or vice versa? Are interest rates the same for both classes of buyer, or does one pay more than the other?

3/ CGT - What is the best way out of BTL other than triggering a CGT charge on sale - If you take the properties to the grave, will CGT become payable by your beneficiaries on the receipt of the inherited properties, or if the estate sells them is CGT payable or does IHT overtake this if above the deceased's allowance?
What is the advantage of dying with your BTLs inside a Ltd. Co.?

Thanks for any answers.

I could have sworn it said, "Financial Adviser" on your profile.