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Hi hubbers,

I was hoping for a little bit of advice.

My wife and I are currently looking to buy our 2nd BTL and we are not sure whether to buy in a Ltd company or not. We are both basic rate tax payers and can afford to buy in our personal names and not be pushed into the higher tax bracket providing we equalise our salaries (although we will be close to the 40 percent tax bracket). We are both 27 and I would like to think that in the next 3-5 years we would have had pay rises making us higher rate tax payers (myself more so as my wife is now working part-time).

So my question is; Do we bite the bullet and invest through a Ltd Company even though the interest rates and costs are higher or do we invest in our personal names and buy all subsequent properties through a company?

on a side note, our current strategy is to invest in areas that are likely to see high capital growth and then recycle that deposit when we remortgage. Is this a flawed strategy when buying in our personal names? My reasoning is that with the lending criteria stress test at 5.5% interest rate x 145% rental income - it now seems that lenders are more interested in achieving rents than the LTV?

Because of this, would we need to buy in a LTD company (where the stress tests are more leniant) for our strategy to work?

A very long winded question! If any of you can give any advice it would be very much appreciated!

Thanks all!

Adam

 

 

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There's no straightforward answer to this and you'll really need to do your own calcs or speak to an accountant. That said, you're clearly planning on using a mortgage, so consider how much the rent will be and what does that do to your tax bracket, remembering that you can't discount all the interest anynore? If your wife is part time, she could own a larger portion of the property, which would help, but it also sounds like you plan to hold this for the long term, so don't just think in terms of current salary.

You've also mentioned about buying future properties in a LTD company, so if you're looking at a portfolio, it may be worth biting the bullet now.

Final thing is what do you want to do with the profit after mortgage etc? If it's to fund your current lifestyle, then you may be better holding it personally, as otherwise you've got corporation tax plus income tax or dividend tax when you withdraw it (over and above the dividend allowance). Again, all depends how much profit there would be, as if it's less than £4k after tax then you could withdraw that free. If the intention is to leave the profit to fund the next one, a ltd company may be best, as you'll pay less tax anyway, plus you can offset mortgage interest etc, although you need to consider how you'll ultimately get your money out.

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Hi Dino, thanks for the heads up.

 

I will definitely seek professional advice with this. As you said, I have to consider the long term. My current plan is to reinvest all profits so to incorporate my be the way to go but my worry is how I am going to withdraw the money further down the line.

If we buy in our own names then I will definitely look at splitting then heavily in favor of my wife to equalise our salaries. Do you know any threads/posts that have any more information on this?

Also can anyone recommend a good Property Tax Accountant I can speak with? Property hub tax seems to be very heavily subscribed at the moment!

Thanks again for the advice

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