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Hi All

I am sure this question may have been asked before but I would appreciate your open views on this point. 

I am currently a basic rate tax payer and would like to purchase our first buy to let. My husband and I decided that I purchase the BTL on my own in my name rather than his as he is a higher rate tax payer.  (Decided not to purchase as a company being our first BTL investment, rates are cheaper and more mortgage options for BTL)

We have done the calculations and worked out that as we will only have one BTL this will not take me into the higher rate tax bracket. 

However, my question is that would it be worth investing as a company from the outset for the future? e.g in the event that I change jobs and then have an increase in wages taking me into the higher rate tax bracket.

I have read how costly it can be to transfer a property from an individual to a company so shall we just do it now!

What are your views/experience on this?

Thanks

Nilma

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Based on what you've described, if I was in your position, I would invest through a company from the get go. Especially if you have plans to purchase more in the future.

If you get a new job in the future and jump to a higher tax bracket, then this will force you to pay the higher rate on the property rental profits too. Whereas if the property income is within a company, then you will only pay the flat corporation tax.

Also you cannot offset the interest you pay on your mortgage as an expenses if the property is owned in your personal name. However, the interest can be offset as an expense if owned via a company. This makes a big difference too!

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Hi @nil-2020

I hope you are well.  When you transfer a property from your own name to your limited company, you're effectively selling the property from you to the limited company.  As such, you'll have to pay stamp duty on the market value of the property, so the amount you will pay will depend on what the property is worth.  Also, if there's an increase in price between when you buy and sell, you may have to pay some capital gains tax if the gain is larger than the capital gains tax allowance, currently around £12,000.

I agree that as a basic rate tax payer, it's worth some proper analysis of whether it would be more effective to own in your personal name or buy through a limited company.  As you say, the mortgage rates are much lower in your personal name, and you do also get to deduct 20% of your mortgage finance costs from your tax bill in your personal name.  There are also additional accounting and admin costs if you go down the limited company route.  To me, it probably only makes sense to go limited company if you plan to build a large portfolio over the long term.

If you'd like to discuss, either on a video chat or a call, then feel free to private message me.

I hope this is helpful!

All the best

Rob

 

 

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