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Buying though ltd company now or later?


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My plan is to grow steady future income that can potentially supplement retirement in 20 years time (4 properties). That said, I’m investing in an area we’re the yields are quite good (13% net ROI pa) and I know capital growth sill be strong over the coming 5-10 years as well due to huge investment in the area, so  an outside chance that I’ll be able to recycle some cash / re-finance and grow my property volume steadily over the years above my target number.

Short term I would like the flexibility to have access to my cash as and when, bang it into an isa, use for repairs and generally have a safety net.  Long term, I know if I creep over 4 properties then I’ll be limited on finance products.

has anyone had a similar predicament? Do I just go ltd now and pay extra on accountancy fees for transactions etc or just go personal up to 4 and always just set up a ltd company if it goes beyond that and purchase any additional properties through that? My wife is a lower rate tax payer so up until we have 4 or 5 properties we will be on basic rate anyway after expenses and deductions etc (she works part time for now).

 

 

 

 

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This is a complicsted subject with many posts but essentially if you are a high rate tax payer, intend on building a decent portfolio, not in need of taking money out of the business, then ltd is generally the way to go - and is what i did from the start - in a similar situation.

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This is something that only an accountant can answer for you, and an answer for one person might not be the same for another. Depends on so many factors that advice on a forum isnt going to cut it. Get proper advice because you cant just change course later on.

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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14 hours ago, ayns said:

My wife is a lower rate tax payer so up until we have 4 or 5 properties we will be on basic rate anyway after expenses and deductions etc (she works part time for now).

Based on this point, with some tax planning you would be able to benefit from your wife's lower marginal rate of tax for some of your subsequent purchases. The ability to continue to benefit from a basic rate relief for finance costs means that Section 24 wont impact you to the same extent as a couple or individual who are higher rate taxpayers.

14 hours ago, ayns said:

Short term I would like the flexibility to have access to my cash as and when, bang it into an isa, use for repairs and generally have a safety net. 

It is easier to access your rental profits if you invest in your own name. You do so as personal drawings, paying income tax. Limited company investors can be caught out by being double taxed by paying corporation tax and then being taxed personally when they extract profits, depending on their method of profit extraction.

Despite the two points I made above, there are clearly many benefits of investing in a limited company too and it is a popular choice with investors. I wrote an article comparing the two here which might help you make up your mind.

Best of luck.

 

 

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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Thanks David. Indeed, guess all circumstances are different as well. At the beginning of my journey (with young kids / wife part time etc) I’d prob like to be able to have access to that cash quickly if life circumstances changed, my idea was then after the 3 - 4 cash flowing properties I would then be very happy to leave all funds circulating in a LTD company for reinvestment and therefore not “double dipping” on corporation and income tax and maybe in later life then drop those profits into a pension if I wasn’t buying anymore.  That was / is the plan anyway! 

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