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TPP 324: Is buy-to-let dead - QUESTION

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Hi Hubers,

In the latest "TPP 324: Is buy-to-let dead?" Rob mentioned this in regards to tax changes:

(..) By buying in a limited company, forgetting about and keep building that portfolio up and when you stop work you then take that income from your company and you are fine.
If you have 2 boxes:
  • 1st box - job income
  • 2nd box - property income
You keep your property box off, and you let the money roll up your property company and you don't touch it. That will increase over time and you build up the portfolio. You only take your money from your job box.
One day when you're ready you turn your job box off and you turn your property box on. (..)

I would like to build my portfolio for the next 15 years from now and I would like to start tomorrow :rolleyes:. Does it mean I should set up an LTD Company and keep buying properties via the company? If yes, then what is going to happen with all that income from these properties? Keep it on saving's account for the next 15 year:o

I was thinking maybe I could employ my partner in the LTD company and she would take that income instead of me B). What do you think? What are your ideas about it?

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Hi Wookash

I guess it depends on your personal, financial and tax situation. Best to speak with your accountant to review the appropriate set up.

As you mentioned, the funds could be saved in a bank account or distributed as a salary, however, you could also use the income to:

  • Purchase more properties, or other investments 
  • Contribute to your pension - likely to be the most tax-efficient, but also means you'll lock it away till it's accessible
  • Distribute any profits as dividends - currently the first £2k is tax-free, and then it steps up into different tiers for tax, making it less attractive 

As always, depending on what you do with the funds, it will have a tax implication.

For me, and this is not tax advice, rather just my thoughts and what I'm currently trying to do. I would keep snowballing it and hopefully have my kid takeover the company if she wanted to when she's older. On the side, I would squirrel some of the funds away into a SIPP (pension) that is invested in a ETF or similar index fund. But, everyone's different with different goals...

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