LTD COMPANY MORTGAGES
Should you set up a Limited Company for your Buy to Let properties?
For each case the response is likely to differ depending on the personal circumstances, portfolio aspirations, evolving tax legislation, administration and the cost differential at outset between personal or Ltd Co options. Only when we review all these points will the right path become clear.
* Please note that some BTL mortgages are not regulated by the FCA.
Advantages of using a Limited Company:
- Tax Relief is given against interest costs, which is different to a personal name structure.
- Greater profit is retained due to Corporation Tax being charged as opposed to Income Tax, that is likely to be very lucrative for those wishing to refinance and grow their portfolio within a limited company.
- Succession/Inheritance planning benefits including avoiding the need for forced disposal and associated IHT costs.
- Reduced choice of Ltd Co lender products and often higher rates and charges.
- A personal guarantee may be required outside the limited company.
- LTV’s are generally lower when borrowing in a limited company structure.
Should you Transfer from Individual name to Limited Company?
It is very important to have a clear strategy in place, in advance of acquiring property. To restructure after completion could be an expensive exercise. It is possible that there will be Capital Gains Tax and Stamp Duty Land Tax (SDLT) on the transfer. The exception is if there is a trading business involved that can procure HMRC consent to transfer assets without crystallising CGT or stamp duty. This is sophisticated planning that will need the involvement of experienced property professional.