Buy to Let landlord - Advice Please

[FlashmanChop]

The initial message was deleted from this topic on 01 December 2009 at 12:17

[Eric Mc]

FlashmanChop said:

Hello all,

I have a house rented on a ast to some dss tenants, runs along fairly smoothly. No major issues.

Feel free to rib me for letting to dss.

I have my own house with my girlfriend which we bought and moved into July this year.

I will hold my hands up and say that both houses are on normal mortgages, not btl.

I am hoping to purchase a number of btl properties from a local company, who I have dealt with before. My query really is

a) As I am employed and pay tax on my earnings, how should I go about setting myself up for paying tax on earnings from rents? Should I set up a ltd company now, should I chose to purchase more over the coming years? I do not want to feel the wrath of the tax man, but wish to use any allowances / tips that are legally available to me. I would also prefer to set up this now, rather than later when things may be complicated, or of there are other ways, including how to track the paperwork etc feel free to explain.

b) How do I protect my self, should my girlfriend leave me? I cant see this happening imminently, but we are only young. 21 & 26. House Nr1 is in my name. Our House is a joint names mortgage, with me providing all the deposit. I am in the process of getting my solicitor to draw up a document stating that I payed the deposit, which gets lodged at the land registry. Don’t think I am being tight, I am not, I just want to protect what is mine. Would simply having the btl mortgages in my name protect me? Or would we go back to a Ltd company?

I think that is it for now… but I am sure my mind will be whirling round with ideas later on.

Thanks for your input ladies and gents.

As you already are renting out a property, you should have notified HMRC by now.

Landlords need to pay Income Tax on the profits generated by their rental properties. They submit the details of their rental income for each tax year by completing and submitting a Self Assessment tax return form.

When did you start letting the current property? If before 5 April 2009, you had better move quickly as you will need to submit a 2008/09 Self Assessment tax return. This is due to be submitted by 31 January 2010 and any self assessment tax payable needs to be paid by 31 January 2010 as well.

If you started letting the property after 5 April 2009, you will need to submit a 2009/10 Self Assessment tax return. That is not due to be submitted by 31 January 2011.

Regarding your future plans, you seem to be thinking along the lines of operating through a limited company. Why?

[Soovy]

Some big issues here.

1. Your mortgages are fraudulent
2. Your house insurance will be invalid if the place burns down
3. Don't get married

Edited by Soovy on Tuesday 1st December 10:38

[Soovy]

FlashmanChop said:

Soovy, some big issues to sort then.

Thanks.

Yeah.

As Eric Mc says, you're liable for income tax on the rental earnings.

[Eric Mc]

FlashmanChop said:

Thanks for the clarification Eric.

Im not sure why I would set up a Ltd Company, just thought it would be easier, but perhaps not.

It seems if I keep clear records of all my finanical delaings I should stay in the clear..

You must realise that renting out properties is not classified as a trading activity by HMRC. Rental Income is deemed to be a form of investment income. Therefore, some of the beneficial Corporation Tax rates which apply to small trading companies cannot be used when the company derives its income mainly from an investment activity - like renting properties.
There are also Capital Gains disdvantages which would arise if and when the company sold its investment property or properties.

The legal advantages of "limited liability" are pretty much wiped out by the tax disadvantes.

Edited by Eric Mc on Tuesday 1st December 16:36

[Wings]

Sort your love life out first, perhaps making her a honest lady, then the tax/accountancy advice might be so so much different.

[andy-sw]

b) How do I protect my self, should my girlfriend leave me? I cant see this happening imminently, but we are only young. 21 & 26. House Nr1 is in my name. Our House is a joint names mortgage, with me providing all the deposit. I am in the process of getting my solicitor to draw up a document stating that I payed the deposit, which gets lodged at the land registry. Don’t think I am being tight, I am not, I just want to protect what is mine. Would simply having the btl mortgages in my name protect me? Or would we go back to a Ltd company?

If you are in a joint tenancy then won't both your names be registered? Just severe the joint tenancy and setup as tenants in common. Then you will be protecting anything that you put in to the property, you will own your share and can do as you wish with it, be it sell it, mortgage it etc.

Don't take this as solid advice as I am not a solicitor, just an opinion as I see it.

[andy-sw]

Just realised how old this is, did you get anything sorted?