A short guide to Limited company buy to let, we always recommend seeking independent tax advice.
Limited companies are not currently affected by the changes coming to mortgage interest relief
Many have seen putting Buy to Lets into LTD companies as a solution to those taxation changes but is a limited company right for you?
Mortgage interest is a expense a LTD company can fully write off against the rental income.
Companies pay corporation tax at 20% on the profit (rental income minus any expenses) which is makes it appealing for the 40% and 45% tax payers.
Remaining profit can be paid out as dividends, which are currently tax free up to £5000. Then charged at: 7.5% for basic rate tax payers; 32.5% for higher and 38.1% for additional rate, this is after the the corporation tax though.
Things to consider
– Depending on whether you are classed as a professional landlord or not you could incur capital gains and stamp duty if you move properties into a LTD company.
– Tax implications are complicated and why we always recommend speaking to qualified tax adviser or accountant.
– Companies have running costs such as accounts needing to be formally filed and directors appointed.
Back to buy to let mortgages and portfolios
Most buy to let’s are not regulated by The Financial Conduct Authority, please refer to your advisor for full details.