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Salary or Dividends? How does this affect future BTL mortgage plans?


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Hi All, 

I've progressed really well in my place of work, and after a recent meeting, my employer has asked if I would like to become a director (with the options to become a shareholder when I am ready in the future). They mentioned I could switch from normal salary to PAYE and dividends but I can't help but think this would change my property plans.  I know the tax savings would be considerable - but for me, property is my dream and I don't want to deviate from my plan!

My goal is to build a small portfolio of good quality BTL's so I can live comfortably, and have something to hand down to my two children. And, of course - not have to work until the government say so. 

Our strategy would involve using BTL mortgages (which I know are somewhat based on the property and how much it will rent for) - but will my position (income) look weaker on paper because I won't have my usual salary, but instead a much lower PAYE, and the rest in dividends? 

Thanks for reading :) 

Steph

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On paper I have very little earnings and have got 9 BTL mortgages in the past 18 months.  They will go off your Tax returns what will show a small earning and dividends.  You may have to go with a slightly higher rate as the mainstream lenders won't like it, but I have mine with TMW, TML and Fleet.  The small extra in interest will be nothing compared to the tax savings. 

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On 1/24/2021 at 4:20 PM, stepho said:

Hi All, 

I've progressed really well in my place of work, and after a recent meeting, my employer has asked if I would like to become a director (with the options to become a shareholder when I am ready in the future). They mentioned I could switch from normal salary to PAYE and dividends but I can't help but think this would change my property plans.  I know the tax savings would be considerable - but for me, property is my dream and I don't want to deviate from my plan!

My goal is to build a small portfolio of good quality BTL's so I can live comfortably, and have something to hand down to my two children. And, of course - not have to work until the government say so. 

Our strategy would involve using BTL mortgages (which I know are somewhat based on the property and how much it will rent for) - but will my position (income) look weaker on paper because I won't have my usual salary, but instead a much lower PAYE, and the rest in dividends? 

Thanks for reading :) 

Steph

It sounds like a good choice for you would be to start a ltd, Purchase your BTL's through that. it seems the best strategy for people not looking to spend the rental income now.

Particularly if you are looking to reinvest the money and expand your property empire.

you can then continue to pay yourself in dividends and this will open a lot more lenders up to you, if you get a good Broker.

Additionally if you have a partner you could split the shareholdings and when you draw down on the income via dividends it will be split as per the share holdings.

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