Ltd co or not for first btl?

[chris76]

Hi all, I’m just about to complete on our first btl, the plan is we’re buying it with cash will renovate and mortgage, I should be able to get all our money back and move straight on the the next project hopefully building up ten and more properties over the next few years. The plan is to pay them keep them for retirement as I am self employed with no pension 

I have spoke with my accountant who recommends not to bother with a ltd co straight away and I can always transfer it/ them at a later date, but surely that would involve selling them to my company and would incur fees and solicitors etc.

i just assumed  it would be best to start off with a ltd co?

just wondering people’s thoughts on the matter?

i realise it’s harder to get mortgages for a new ltd co, as this will be our first btl (for 15 years anyway) and the wife doesn’t work so that would help the tax situation

[matthew_hill]

Hi Chris, 

I must say I strongly disagree with the views of your accountant. Put politely to move a property from your own name into a ltd company is a huge pain in the backside! not to mention costly as you need to pay SDLT again and capital gains tax. 

It's true that the mortgage market is less competitive in the ltd company space. Typically you will be paying more in interest. 

I have gone over this with my accountant a few years ago, everybody's circumstances are different so please don't take what I say as gospel. But we came to the conclusion that as I was buying more than 2 properties it made sense to go down the ltd company route. So in your position as you are looking at building to 10 or so I would be very confident that be the case for you also. 

When you have only one property in the ltd company the costs will be higher, in terms of accountancy fees and interest. But as you are looking at building over the long term the savings you will make in the ltd route will be much larger. 

Again must stipulate -  I am not a tax advisor, this is only my experience and yours may differ. 

I hope this helps. Also I have a brilliant contact who specialises in clients looking to buy property in a ltd company and can really help you save Money. Please do drop me a line if you want me to put you in touch with him. 

All the best, Matthew. 

[chris76]

Thanks Matthew , that’s exactly what I was thinking, I’m not sure if I’ll have to time to set it up before it completes, the searches were started a couple of weeks ago so I would think it may complete in the next week or two.

however like I say im not that bothered if we left this first property in our names or even in my wife’s  as she doesn’t work.That way we might find it easier to get a ltd company mortgage on property number 2

However if you guys disagree and think itl be better ltd from the start then ill get straight into it

thanks again

[chris76]

ok thanks for your replies, i think it might be best if i just let this first sale go through on a personal btl mortgage then, which is what i was hoping to hear unless you lot told me i was making a big mistake from the start.

just concerned about the tax though because im more or less a higher tax rate payer,  i just keep under by making big purchases at the end of the year.

with the wife not working do you think it would be best solely in her name, although i know we will find less mortgages available to us? we would need to get our money back out straight away for the next property

thanks again

 

 

 

[haf1963]

I wasin the same place as you in 2015 when i started (HRT and non-working partner) and all the mortgaeg rules were starting to change. After much thinking and reading I went straight to ltd, employed my partner to handle all the admin plus took advantage of all the expense deductions etc. I did 1 property a year since then ad I am definitly glad i went ltd with hindsight, yes the first couple of years were basically making no profit and yes the mortgage rights are higher but on balance it was the rright decision. Had i stayed with 1-2 properties then it would not have worked but now i am making a good profit and using all the advantages of being a ltd to hardly paying any tax.

As others have said the decision is really really dependent on your personal circumsatnce and goals.

[ayns]

When you say you are taking all the advantages of the ltd company and have greatly reduced your tax bill...what volumes are you taking about? Maybe not turnover but volume of properties etc?

Again I'm trying to work out if it is worth it!

thanks

[haf1963]

when i had 5 properties with mortgages on 4 i was making zero profit from approx 40k turnover. I have added a hmo since then which is another 30k turnover so have generated more profit since then - but uising that to buy an electric car which can be written off against profit so no tax again this year. Not sure i want to go into too much detail in a public form so feel free to send me a private message

[chris76]

On 9/27/2020 at 8:55 AM, haf1963 said:

As others have said the decision is really really dependent on your personal circumsatnce and goals.

well i'm border line hrt payer, the wife doesn't work

spoke to the solictiors today and the searches are back so i need to decide straight away whether residential btl or ltd co.

my gut is telling me just to put this one through as residential and look into a ltd co further down the line, im not sure wether to just put it into the wifes name or both of ours? if its both of ours does that mean the tax liability is split straight down the middle?

[chris76]

also on another thought on the current system

lets assume he only income the wife makes for the foreseeable, comes  from property and the rent is around £400 p/m does that not mean she could have ten properties in just her name before it becomes an issue?

however, with her not having a job would she not be able to get a btl mortgage?

also we aren’t looking to make any money from this venture, we would be ploughing any profit into building a portfolio, so maybe a ltd co would be best?

[haf1963]

12 hours ago, chris76 said:

my gut is telling me just to put this one through as residential and look into a ltd co further down the line, im not sure wether to just put it into the wifes name or both of ours? if its both of ours does that mean the tax liability is split straight down the middle?

This is not a bad idea as it gives you some experience and you can then decide if you really want to be serious and grow a decent portfolio etc. You also get to see the market conditions and the impact of all the current and ewn govt legislation. If things are still good for you in 12 months maybe buy 2nd in a LTD. The transfer costs will not be huge in 1-2  years if you do decdie to go all LTD as you won't really have capital growth so it will be stampduty and legal mainly

[chris76]

So both our names or the wife’s?

[haf1963]

1 hour ago, chris76 said:

So both our names or the wife’s?

I would say that if its in your wifes name, who doesn't work,  then you will have a hard time mortgaging it so should be in both names. You can do a 99% her and 1% you type arrangement but really need a solicitor and mortgage brokers advice on where the mortgage companies draw the line..\

Obviously I am just giving you my opinion and it may or may not be the right answer so definitly also get some professionla advice

[chris76]

Yeah the wife asked the solicitor about a 99-1% split this afternoon, he said he’s heard about it but never done one, is it to do with the tenancy agreement? 

[chris76]

Lol, yeah I’ll speak to a property accountant later down the line, just wanted a collective view of what people on these forums do,  I’m sure most started off with a similar position with myself

so I’ll tell the solicitor today to put it in both our names and will elect for a 99-1 split on the rent if that’s what can be done