BTL - Ltd Company
Discussion
MrChips said:
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.
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!
That's how we do things with our German rental i.e Properties in joint names but rental agreements are in the Wife's name and all monies paid to her.(so much easier over there). After taking advice from our accountants in the UK, they said that even if the property was in my Wife's name only along with the rental agreement, HRMC would view this as shared and we'd need to declare half the income at my tax rateCost 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!
JPJPJP said:
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
Yes, good points. i'd need to check this with our accontantsIf 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:
That's how we do things with our German rental i.e Properties in joint names but rental agreements are in the Wife's name and all monies paid to her.(so much easier over there). After taking advice from our accountants in the UK, they said that even if the property was in my Wife's name only along with the rental agreement, HRMC would view this as shared and we'd need to declare half the income at my tax rate
That’s correct... the name on the rental agreement and on the deeds is irrelevant if you’re married... however the Form17 route is the recognised process to do exactly as you’ve outlined. https://www.gov.uk/government/publications/income-...
From their main page
“ If you jointly own property with your spouse or civil partner and want to change the split of income from it for tax purposes use Income Tax form 17.”
Have a chat with a solicitor and/or a different accountant.
MrChips said:
That’s correct... the name on the rental agreement and on the deeds is irrelevant if you’re married... however the Form17 route is the recognised process to do exactly as you’ve outlined.
https://www.gov.uk/government/publications/income-...
From their main page
“ If you jointly own property with your spouse or civil partner and want to change the split of income from it for tax purposes use Income Tax form 17.”
Have a chat with a solicitor and/or a different accountant.
Looks like I need a different accountant! This aside, I think the best route is registering a company and getting a regulated mortgage as I think it makes more sense as you get tax relief on the mortgage payments - which makes a lot of difference in terms of viability.https://www.gov.uk/government/publications/income-...
From their main page
“ If you jointly own property with your spouse or civil partner and want to change the split of income from it for tax purposes use Income Tax form 17.”
Have a chat with a solicitor and/or a different accountant.
ferrisbueller said:
What about getting the money/property back out of the Ltd?
depends what you want to do, but there’s a few options:- capital that was initially invested in the company (probably as a directors loan) can be removed tax free. unless this has been being repaid over the years.
- you could look at entrepreneurs relief and fold the limited company and sell off assets, which has a different rate of tax
- sell the property, pay corporation tax on the profit that has been made, then remove that cash via paye/ dividends paying the appropriate tax in one hit.
- or as above sell up but stagger the cash out over a few years, taking out what you need/ keeping it an appropriate level to reduce tax liability
- as above, sell up but use cash and pay it into your pension. obviously maximum amounts you can pay in, but you may have carry forward allowances from previous years. this option can also reduce the corporation tax bill.
but people putting property into a limited company should probably have thought about the exit strategy before going down this route.
Candellara said:
Looks like I need a different accountant! This aside, I think the best route is registering a company and getting a regulated mortgage as I think it makes more sense as you get tax relief on the mortgage payments - which makes a lot of difference in terms of viability.
Don’t forget you still get basic rate relief on mortgage interest under the new rules/recent changes so if your wife is a basic rate payer, and the income doesn’t push her into the 40% bracket..... you can effectively claim full relief for mortgage interest payments.DoubleSix makes a good point about the notes on form17 referencing the property being in joint names so that’s something to check.... I’d assume it works ok if you’re married and the house is only in one name but HMRC would need to confirm.
Edited by MrChips on Wednesday 22 January 11:47
MrChips said:
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.
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!
Chips, did you use a tax planner for the advice and lawyer to draw up the agreement? Something I need to look into asap now we have changed the deeds of our BTL to joint names.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!
MrChips said:
Don’t forget you still get basic rate relief on mortgage interest under the new rules/recent changes so if your wife is a basic rate payer, and the income doesn’t push her into the 40% bracket..... you can effectively claim full relief for mortgage interest payments.
DoubleSix makes a good point about the notes on form17 referencing the property being in joint names so that’s something to check.... I’d assume it works ok if you’re married and the house is only in one name but HMRC would need to confirm.
Sadly not, guess how I know! DoubleSix makes a good point about the notes on form17 referencing the property being in joint names so that’s something to check.... I’d assume it works ok if you’re married and the house is only in one name but HMRC would need to confirm.
Edited by MrChips on Wednesday 22 January 11:47
Anyone care to give me a rough idea what I would expect to pay for the following, and if it’s doable .
I’m building 4 houses (with a friend) at the moment each valued at £165k, no borrowing on them. I’m thinking of getting a 75% mortgage on all of them which would give me enough to buy them off my friend and some cash back for me. Rental income would be around £650 per month per house. Probably interest only, they are being built using money we have put into a Ltd Co. Am I mad or does it sound feasible ??
I’m building 4 houses (with a friend) at the moment each valued at £165k, no borrowing on them. I’m thinking of getting a 75% mortgage on all of them which would give me enough to buy them off my friend and some cash back for me. Rental income would be around £650 per month per house. Probably interest only, they are being built using money we have put into a Ltd Co. Am I mad or does it sound feasible ??
malks222 said:
depends what you want to do, but there’s a few options:
- capital that was initially invested in the company (probably as a directors loan) can be removed tax free. unless this has been being repaid over the years.
- you could look at entrepreneurs relief and fold the limited company and sell off assets, which has a different rate of tax
- sell the property, pay corporation tax on the profit that has been made, then remove that cash via paye/ dividends paying the appropriate tax in one hit.
- or as above sell up but stagger the cash out over a few years, taking out what you need/ keeping it an appropriate level to reduce tax liability
- as above, sell up but use cash and pay it into your pension. obviously maximum amounts you can pay in, but you may have carry forward allowances from previous years. this option can also reduce the corporation tax bill.
but people putting property into a limited company should probably have thought about the exit strategy before going down this route.
No entrepreneurs relief available for a company like this- capital that was initially invested in the company (probably as a directors loan) can be removed tax free. unless this has been being repaid over the years.
- you could look at entrepreneurs relief and fold the limited company and sell off assets, which has a different rate of tax
- sell the property, pay corporation tax on the profit that has been made, then remove that cash via paye/ dividends paying the appropriate tax in one hit.
- or as above sell up but stagger the cash out over a few years, taking out what you need/ keeping it an appropriate level to reduce tax liability
- as above, sell up but use cash and pay it into your pension. obviously maximum amounts you can pay in, but you may have carry forward allowances from previous years. this option can also reduce the corporation tax bill.
but people putting property into a limited company should probably have thought about the exit strategy before going down this route.
keekodog said:
JBM78 said:
No entrepreneurs relief available for a company like this
Neither is paye or pensionentrepreneur relief- as I understand it, you have close down the company and not trade in that sector for 2 years. I assumed selling up all property would allow you to close off the company via that route?
as for paye/ dividend- why can the limited company holding the property not pay you a salary from its profits under paye? or why can it not pay into a private pension with profit?
I genuinely thought these were options? I have been starting my research with a view to potentially looking at btl in a limited company
malks222 said:
can I ask why to both of these??
entrepreneur relief- as I understand it, you have close down the company and not trade in that sector for 2 years. I assumed selling up all property would allow you to close off the company via that route?
as for paye/ dividend- why can the limited company holding the property not pay you a salary from its profits under paye? or why can it not pay into a private pension with profit?
I genuinely thought these were options? I have been starting my research with a view to potentially looking at btl in a limited company
My accountant advised me entrepreneurs relief is a viable exit strategy (for now at least anyway!) for a company set up around property like this. Hell, you can even do each property in a separate company and wind them up each time I believe only paying that special tax rate.entrepreneur relief- as I understand it, you have close down the company and not trade in that sector for 2 years. I assumed selling up all property would allow you to close off the company via that route?
as for paye/ dividend- why can the limited company holding the property not pay you a salary from its profits under paye? or why can it not pay into a private pension with profit?
I genuinely thought these were options? I have been starting my research with a view to potentially looking at btl in a limited company
Out of interest, could people please dm me or let me know what mortgage broker or mortgage lender they’ve used when using an SPV for property? Seen 2.03% rate mentioned above which seems crazy good?! Better than my resi mortgage!
lewisf182 said:
My accountant advised me entrepreneurs relief is a viable exit strategy (for now at least anyway!) for a company set up around property like this. Hell, you can even do each property in a separate company and wind them up each time I believe only paying that special tax rate.
Out of interest, could people please dm me or let me know what mortgage broker or mortgage lender they’ve used when using an SPV for property? Seen 2.03% rate mentioned above which seems crazy good?! Better than my resi mortgage!
UK mortgage market really grates on me and another reason why until now we haven't pursued a UK BTL. 2.03% for a regulated BTL was through UK Property Finance. I'd be also interested to hear of other providersOut of interest, could people please dm me or let me know what mortgage broker or mortgage lender they’ve used when using an SPV for property? Seen 2.03% rate mentioned above which seems crazy good?! Better than my resi mortgage!
Our German bank doesn't differentiate between residential or letting - a mortgage is a mortgage secured on the property. Our last mortgage deal in Germany was 1.4% fixed for 10 years
Candellara said:
UK mortgage market really grates on me and another reason why until now we haven't pursued a UK BTL. 2.03% for a regulated BTL was through UK Property Finance. I'd be also interested to hear of other providers
Our German bank doesn't differentiate between residential or letting - a mortgage is a mortgage secured on the property. Our last mortgage deal in Germany was 1.4% fixed for 10 years
The fees and rates associated with various mortgage types is an interesting variable. It's almost like the banks want a share of the profits and aren't just happy with making the money on their interest Our German bank doesn't differentiate between residential or letting - a mortgage is a mortgage secured on the property. Our last mortgage deal in Germany was 1.4% fixed for 10 years
Can't see what other reason there would be for them to see a mortgage as being a different thing on the same property. Obviously it's LTV dependent but there are BTL deals around near the number you quoted.
Candellara said:
lewisf182 said:
My accountant advised me entrepreneurs relief is a viable exit strategy (for now at least anyway!) for a company set up around property like this. Hell, you can even do each property in a separate company and wind them up each time I believe only paying that special tax rate.
Out of interest, could people please dm me or let me know what mortgage broker or mortgage lender they’ve used when using an SPV for property? Seen 2.03% rate mentioned above which seems crazy good?! Better than my resi mortgage!
UK mortgage market really grates on me and another reason why until now we haven't pursued a UK BTL. 2.03% for a regulated BTL was through UK Property Finance. I'd be also interested to hear of other providersOut of interest, could people please dm me or let me know what mortgage broker or mortgage lender they’ve used when using an SPV for property? Seen 2.03% rate mentioned above which seems crazy good?! Better than my resi mortgage!
Our German bank doesn't differentiate between residential or letting - a mortgage is a mortgage secured on the property. Our last mortgage deal in Germany was 1.4% fixed for 10 years
Thanks for the steer on UK property finance. Again if anybodies set up BTL in a company and used specific mortgage lenders I'd love to get more providers to be able to get in touch with as I'm sure a few on here would also appreciate it.
MrChips said:
Candellara said:
That's how we do things with our German rental i.e Properties in joint names but rental agreements are in the Wife's name and all monies paid to her.(so much easier over there). After taking advice from our accountants in the UK, they said that even if the property was in my Wife's name only along with the rental agreement, HRMC would view this as shared and we'd need to declare half the income at my tax rate
That’s correct... the name on the rental agreement and on the deeds is irrelevant if you’re married... however the Form17 route is the recognised process to do exactly as you’ve outlined. https://www.gov.uk/government/publications/income-...
From their main page
“ If you jointly own property with your spouse or civil partner and want to change the split of income from it for tax purposes use Income Tax form 17.”
Have a chat with a solicitor and/or a different accountant.
Who knew? (Not me)
lewisf182 said:
malks222 said:
can I ask why to both of these??
entrepreneur relief- as I understand it, you have close down the company and not trade in that sector for 2 years. I assumed selling up all property would allow you to close off the company via that route?
as for paye/ dividend- why can the limited company holding the property not pay you a salary from its profits under paye? or why can it not pay into a private pension with profit?
I genuinely thought these were options? I have been starting my research with a view to potentially looking at btl in a limited company
My accountant advised me entrepreneurs relief is a viable exit strategy (for now at least anyway!) for a company set up around property like this. Hell, you can even do each property in a separate company and wind them up each time I believe only paying that special tax rate.entrepreneur relief- as I understand it, you have close down the company and not trade in that sector for 2 years. I assumed selling up all property would allow you to close off the company via that route?
as for paye/ dividend- why can the limited company holding the property not pay you a salary from its profits under paye? or why can it not pay into a private pension with profit?
I genuinely thought these were options? I have been starting my research with a view to potentially looking at btl in a limited company
Out of interest, could people please dm me or let me know what mortgage broker or mortgage lender they’ve used when using an SPV for property? Seen 2.03% rate mentioned above which seems crazy good?! Better than my resi mortgage!
Gassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff