BTL - Ltd Company
Discussion
The issues within the UK BTL market are well documented with all of the legislation coming into effect / 2nd home stamp duty etc so what are all the BTL landlords up to in order to mitigate this?
I'm still looking to purchase a small BTL property and I assume the most prudent / tax efficient way is set up a Ltd company?
I'm still looking to purchase a small BTL property and I assume the most prudent / tax efficient way is set up a Ltd company?
JPJPJP said:
Your assumption could be spot on, or miles off. It depends on your broader situation and plans.
OK, so we have some BTL's in Germany but it's a totally different market, proposition etc and have tried to avoid UK due to mortgages, regulations etc. I looked at this a few years back and decided that the UK has bastardised this sector and we just used some capital to buy another in Germany.That said, I'm revisiting it as i want to buy a 3 bed semi (circa £325k) and let it to my Daughter. Deposit £125k and can get an interest only regulated mortgage on 200k. Plan is to let to Daughter at market rate and overpay mortgage annually with the difference between mortgage (circa £300 per month) and tax liability.
Mortgage is absolutely A OK, through my name but how is this affected if running through a UK Ltd Company?
Candellara said:
JPJPJP said:
Your assumption could be spot on, or miles off. It depends on your broader situation and plans.
OK, so we have some BTL's in Germany but it's a totally different market, proposition etc and have tried to avoid UK due to mortgages, regulations etc. I looked at this a few years back and decided that the UK has bastardised this sector and we just used some capital to buy another in Germany.That said, I'm revisiting it as i want to buy a 3 bed semi (circa £325k) and let it to my Daughter. Deposit £125k and can get an interest only regulated mortgage on 200k. Plan is to let to Daughter at market rate and overpay mortgage annually with the difference between mortgage (circa £300 per month) and tax liability.
Mortgage is absolutely A OK, through my name but how is this affected if running through a UK Ltd Company?
My friend has just done this, he’s got about nine BTL and this was his first through a LTD Co.
He got there in the end but said it was a bit of a nightmare. I rented a house to my sister for years without issue, but yes officially it’s a big no.no with lenders. Would it not be better to gift your daughter the £125k and let her get a small mortgage on something less expensive?
He got there in the end but said it was a bit of a nightmare. I rented a house to my sister for years without issue, but yes officially it’s a big no.no with lenders. Would it not be better to gift your daughter the £125k and let her get a small mortgage on something less expensive?
If we go down the standard route of buying in my name but the rental agreement is in my Wife's name - we still have to declare 50% of the net income at my tax rate and 50% at my Wife's tax rate. If you do the math's - it's still not particularly attractive to do it in the UK when mortgage relief is scrapped - hence questions about routing it through a LTD company
What's everyone else with BTL's doing (apart from selling them up :-))
Bought a BTL in 2014 and have let it constantly ever since.
It's in a small village. Rent is approx. £550 pcm which covers the mortgage and we overpay £100 pcm.
Pay the mortgage off in 6 years but will probably move into it before then and rent out our present house so effectively downsize.
Not sure of the CGT issues doing that.
At the moment I can't see any issues keeping it.
The Natwest BTL mortgage was very straightforward. We had a decent deposit (30%) so got a good rate.
It's in a small village. Rent is approx. £550 pcm which covers the mortgage and we overpay £100 pcm.
Pay the mortgage off in 6 years but will probably move into it before then and rent out our present house so effectively downsize.
Not sure of the CGT issues doing that.
At the moment I can't see any issues keeping it.
The Natwest BTL mortgage was very straightforward. We had a decent deposit (30%) so got a good rate.
Apparently regulated BTL mortgages via a new Ltd Company are no problem as we'd be the Directors of the Company.
We've had some initial info and illustration from one broker but i always like to get some comparative quotes. Can anyone recommend any good BTL regulated mortgage providers?
We've had some initial info and illustration from one broker but i always like to get some comparative quotes. Can anyone recommend any good BTL regulated mortgage providers?
Unless your daughter already holds property, or potentially even if she does, why wouldn’t you give her the cash and guarantee the loan if need be, meaning (potentially) no +3% stamp, no BTL rate, made worse with the family aspect adding a loading I’m sure.
Surely efficient tax planning means you give it to her!!?
Surely efficient tax planning means you give it to her!!?
Candellara said:
If we go down the standard route of buying in my name but the rental agreement is in my Wife's name - we still have to declare 50% of the net income at my tax rate and 50% at my Wife's tax rate. If you do the math's - it's still not particularly attractive to do it in the UK when mortgage relief is scrapped - hence questions about routing it through a LTD company
What's everyone else with BTL's doing (apart from selling them up :-))
Keeping below the higher rate of tax. If I wasn’t I’d be going down the ltd company route or working less. What's everyone else with BTL's doing (apart from selling them up :-))
Macron said:
Unless your daughter already holds property, or potentially even if she does, why wouldn’t you give her the cash and guarantee the loan if need be, meaning (potentially) no +3% stamp, no BTL rate, made worse with the family aspect adding a loading I’m sure.
Surely efficient tax planning means you give it to her!!?
Mortgage rate on regulated mortgage is 2.03%. Daughter doesn't earn enough to secure a 200k mortgage on her own (she's only just started work after leaving Uni) and I don't want the complications of her partner wanting a slice should they split at any point. She's currently renting a flat which is costing her & her partner £1k per month so the plan is, is to put it into the family coffers rather than another landlord. We'll take her rent and pay the mortgage down and subsequently the income thereafter. Ultimately the property will be left to her anyhow but that's some 25 years away. Her plan is to buy a property in maybe 5 years time at which point i'll sort her out with a deposit of her own and we'll continue to let said property.Surely efficient tax planning means you give it to her!!?
So it addresses the immediate issue of her paying someone else's mortgage off rather than keeping it in the family.
Or is my logic flawed?
Candellara said:
Mortgage rate on regulated mortgage is 2.03%. Daughter doesn't earn enough to secure a 200k mortgage on her own (she's only just started work after leaving Uni) and I don't want the complications of her partner wanting a slice should they split at any point. She's currently renting a flat which is costing her & her partner £1k per month so the plan is, is to put it into the family coffers rather than another landlord. We'll take her rent and pay the mortgage down and subsequently the income thereafter. Ultimately the property will be left to her anyhow but that's some 25 years away. Her plan is to buy a property in maybe 5 years time at which point i'll sort her out with a deposit of her own and we'll continue to let said property.
So it addresses the immediate issue of her paying someone else's mortgage off rather than keeping it in the family.
Or is my logic flawed?
Not at all. A lot of people do this when children are at uni. Makes perfect sense. So it addresses the immediate issue of her paying someone else's mortgage off rather than keeping it in the family.
Or is my logic flawed?
BoRED S2upid said:
Not at all. A lot of people do this when children are at uni. Makes perfect sense.
So do you still get whacked with 2nd home stamp duty? as is the Ltd Company that's purchasing the property? Also, the mortgage payments and any other costs are offset against any annual profit. If we make maximum overpayments on the mortgage, there'll be effective zero profit until the mortgage is paid down so the tax liability will be zero?Company pays the higher rate of SDLT.
If the company makes a profit (it has to if it can afford to pay down capital I suppose) then it could have a tax liability of its own
Think about how the deposit is put into the company and how / when it comes back out
Many other things but if you are only buying one, they are less significant
If the company makes a profit (it has to if it can afford to pay down capital I suppose) then it could have a tax liability of its own
Think about how the deposit is put into the company and how / when it comes back out
Many other things but if you are only buying one, they are less significant
Candellara said:
If we go down the standard route of buying in my name but the rental agreement is in my Wife's name - we still have to declare 50% of the net income at my tax rate and 50% at my Wife's tax rate. If you do the math's - it's still not particularly attractive to do it in the UK when mortgage relief is scrapped - hence questions about routing it through a LTD company
What's everyone else with BTL's doing (apart from selling them up :-))
You can do a declaration of trust to put the benefit of interest into your wife name. You still jointly own the house but the benefit is your wife’s.. submit a Form17 to HMRC and once they’ve acknowledged it then you can declare the income from that point on to be solely in your wife’s name.What's everyone else with BTL's doing (apart from selling them up :-))
Cost us around £400 from memory to have the declaration drawn up and get some independent advice.
Oh and this was on the massive assumption that your wife gets paid less than you... it also works the other way round if you need it to!
Gassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff