Ltd Company or Personal Name for newbie buying for cash?

Hi Henry,

Initially Section 24 mortgage interest relief restrictions will not affect you as there is no mortgage interest to offset against rental income and not currently a high rate tax payer.

However, if you get a good accountant then buying in the name of a Limited company (preferably an SPV for mortgage lenders) then you are preparing yourself for the future as transferring existing properties to a company is far more difficult and costly later on.

The Partnership aspect only helps later on if you are trying to incorporate, but not if you take that route at the start.

I would suggest you spend some time on our main tax planning tab >> https://www.property118.com/tax/

The Downside of a Ltd company is that you will pay corporation tax straight away.

Therefore as you currently have no other income you will not be using your £11,500 personal tax allowance.

If I was starting afresh today, I would form a company, as the government won’t interfere with corporate business as business, basically write policy by lobbying them constantly, so the government is leaving corporations alone so they can bring in higher profits for there shareholders and lower corporate tax for them at every budget that’s practical. Or when they can slip one in, without the masses (herd) noticing. Right now there is an attack on private landlords to foist them out, as big business sees an opportunity to rent corporate housing on a mass scale too currently 25% of the population. Home ownership is out of reach for the common man and we’re going back to Victorian times were renting was the norm and only the gentry held land....remember all cottage industries went down the pan in the industrial revolution, the same is happening now with this sector..... protect yourself now by wrapping your investment inside a Limited company or a Special purpose vehicle (SPV) as suggested by the last comment.

Just a personal view, but I would avoid a partnership.

Unless you see 'eye to eye' on absolutely everything (every tiny little detail) you will fall out and need to split the business.

Good luck with you new venture.

Hi Henry,
As an aside, I would be interested to hear where you intend to study the masters in property. Reason: My son is also staring as an undergraduate in 2018 but could not find a course that was specifically for property development. They were more geared towards estate management and/ or surveying. Please advise if you can. Thanks

Yes partnerships are easily broken up over a simple disagreement, or a conflict in were the business is heading, you should draw up a partnership agreement, Detailing every last move each partner has too take in different senecios, like ill health , obtain partnership insurance , etc I would recommend avoiding at all cost.

Dear Henry
A friend of mine wanted to invest in property in 2000 so we set up a limited company. It continues to work very well. It's very transparent and not too onerous to manage (although my friend is an accountant). This was set up way before s24 was an issue. It is straightforward to transfer ownership (i.e. shares) to other family members and the company has some gravitas, as opposed to a partnership. We do have a shareholder agreement and keep the records properly, although it's not too difficult.

There may be some tax disadvantage to being limited if you have limited personal income, but if you intend to grow your own income then this should not be a long term problem.

Graham

Reply to the comment left by Neil Patterson at 31/10/2017 - 14:25Wouldn't taking your personal allowance as salary reduce the company profits by that amount and therefore reduce the amount of corporation tax payable?
Of course, NICs will need to be factored in as well.