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Releasing capital from multiple BTLs within LTD company to fund new family home


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Hi all,

Happy New Year!

I’m a new to property and considering my first BTL investment in 2021

My husband and I both work full time and earn a joint income 90K (roughly 45k each) and my husband has his own Ltd company.

We own one property, our home, and we are re-mortgaging to extract a deposit of 60K to invest in our first BTL with a view to acquire a new property every 18 months.

We are deliberating whether to set up as a LTD company and one of our key concerns is how to extract equity from the BTL without selling the property to fund the purchase of our next home property within the next 5/6 years.

How best can we structure the transfer of capital between multiple BTL properties to our LTD company to assist our new home purchase?

What would be the most tax efficient means to do this?

Any advice or assistance would be greatly appreciated.

They say the first one is the scariest! 

Kind Regards 

Lauren + Matthew

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I am not sure what you are trying to do. In simple terms

- remortage and extract 60k personally

- do a directors loan of 60k to the LTD company which can then buy the BTL

- you can do more directors loans to the LTD to help finance the next property or remortgage within LTD

- the loans can be extracted from the company any time with no tax implications

- the ltd will have to pay corporation tax on the rental profits independent of the directors loans.

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Haf1693 has pointed out Directors Loan account. Essentially any capital the directors inject into the company, the company owes it back to the directors. You can also charge interest on the Directors Loan Account. This would enable you to extract whatever capital was injected into the company tax free as well as potentially charging interest on the balance. But clearly you can only do this along as there is a balance on the account. If the account becomes overdrawn (ie the director owes money to the company) then there can be tax implications so take care. Directors loan account is probably the most straight forward way you will achieve your requirements bearing in mind how capital intensive property investing is, the account can build up to be a significant sum over time.

Your other options for extracting funds would be:

  • Dividends - Up to 2,000 pounds per shareholder tax free and you will then pay dividend tax for anything above this at your marginal rate. You need to be making a profit before you can pay dividends. Many property companies take a number of years to make a profit so don't count on this from day one.
  • Salary - This probably isn't going to tax efficient because you are both earning close to the higher rate threshold. However if your salary was to change in the future you could also look at this an an option.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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I would just add to check with your broker to ensure that releasing funds from limited company properties to then extract from company to buy residential property, would be acceptable from the lenders perspective if that is something you are looking to do.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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Lenders are generally comfortable with any property purchase as a reason for deposit. Its easy to verify, and remains as wealth for the client, as opposed to a purchase of a depreciating asset. I presume that lenders expect the HMRC to manage whether the money can legally be taken from the company as thats not something im asked about on Ltd company remortgage cases.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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