Ltd Company or Buy in my own name

[james_r_l]

Hi everyone, 

Just after a bit of advice, looking at buying my first BTL this year and not sure how to structure things efficiently for tax purposes. I earn 41k and my wife earns 25k so I was thinking it would be better not buying through a Ltd company. Would it be best to buy in joint names and split it 90/10 say in favour of my wife as she earns less or just put it all in her name for ease? 

The long term goal is to add a property every 1-2 years so there would be a point hopefully when we start approaching the high rate of tax, would this be the time to start incorporating when I approach the higher band tax threshold?

Any advice would be greatly appreciated

James

[taxantics]

It’s only jointly owned property that you have to have income following the equity. You can hold property 100% in your name and your wife could manage it for the profits. It’s worth having  documentation to support the arrangement. I structure similar for my clients so they can potentially incorporate  with no CGT or SDLT if they want to once their business grows. Good luck!

[EvolutionBlogger]

On 2/17/2022 at 4:49 PM, james_r_l said:

Just after a bit of advice, looking at buying my first BTL this year and not sure how to structure things efficiently for tax purposes. I earn 41k and my wife earns 25k so I was thinking it would be better not buying through a Ltd company. Would it be best to buy in joint names and split it 90/10 say in favour of my wife as she earns less or just put it all in her name for ease? 

The long term goal is to add a property every 1-2 years so there would be a point hopefully when we start approaching the high rate of tax, would this be the time to start incorporating when I approach the higher band tax threshold?

 

There is no clear answer to this question. There are advantages and disadvantages to both. The import thing is to know the full details about both, and then make up your mind.

To summarise briefly:

• Limited company pays lower taxes of 19% (vs 20-45% in own name)
• Section 24 doesn't apply to limited companies (goof for ltd co's!)
• Mortgage rates are higher in limited companies
• Accounting costs are higher in limited companies

I have written a couple of short articles that I think would help you a lot.

• Sole Trader or Limited Company. Which is best?
• Buy to let taxes. What do you have to pay?

 

[david slater]

You could look at buying in your own names initially and make a joint property election whereby lions share of income effectively goes to your wife. You would have to purchase as tenants in common and sign a deed of trust, followed up by a HMRC form 17.

If you have ambitions to grow beyond a small handful of properties you might be best to look at a limited company from the start. This would give you more flexibility to earn more outside of property if salaries increase in the future without having to pay too much income tax. This might suit if you are happy to keep profits reinvested within the company, at least in the medium term.

As somebody who owns property in my own name and within a company I do find it a bit of a fiddle sometimes in effect running 2 separate property businesses.

As always taking professional advice is recommended before embarking on a new business venture.

[james_r_l]

Huge thank you Taxantics, Vineet and David, lots to think about. I've always been a PAYE employee so I've struggled getting my head around all the tax stuff so I do appreciate all your help and advice.

Many thanks

James

[EvolutionBlogger]

Tax is one of the most important skills of being a property investor. So make sure you get clued up on it

 

[james_r_l]

Any books or resources you'd recommend? Had a look at the books that the Tax cafe do which seem to be recommended on here. Are they a good start?