I doubt many have done this, unless it's a serious business who is going to be willing to take a capital gains tax and SDLT hit? Better to just sell instead.
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Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Limited companies don't pay capital gains tax, they would have to pay corporation tax at 19%... I'm not sure how the whole thing works but it seems to be popular.
Limited company structure keeps landlords afloat
Landlords looking to make ends meet amid a tight tax structure and rising interest rates are increasingly turning towards company structures, and many are growing their portfolios.
www.ftadviser.com
The above poster is correct. For the landlord to put the house they already own into the company they would have to transfer the asset to the company. That would trigger a CGT charge on the landlord and a SDLT charge on the company. It’s no different to when the landlords sells the property to another person.Limited companies don't pay capital gains tax, they would have to pay corporation tax at 19%... I'm not sure how the whole thing works but it seems to be popular.
Limited company structure keeps landlords afloat
Landlords looking to make ends meet amid a tight tax structure and rising interest rates are increasingly turning towards company structures, and many are growing their portfolios.
Likewise to get the money back out of the company it is taxed twice. First all the rental profits to CT, all the gains on the properties to CT and then to extract the money from the company the individual is taxed on the money they extract.
Likewise you can’t mitigate the risk of the government just changing the rules of people just put them all in corporate wrappers to make sure they are treated the same way as unincorporated landlords.
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Hi all,
I work and live in London as of this year but from the Black Country/Brum area. I don't want to buy in London, i'd rather continue to rent here and buy in the 'homeland' and rent that out.
Are we hoping for rate drops in the Spring or is it likely we are going to have to wait longer. I understand no one can be sure but just looking for peoples thoughts.
Cheers!
I work and live in London as of this year but from the Black Country/Brum area. I don't want to buy in London, i'd rather continue to rent here and buy in the 'homeland' and rent that out.
Are we hoping for rate drops in the Spring or is it likely we are going to have to wait longer. I understand no one can be sure but just looking for peoples thoughts.
Cheers!
You have to pay CGT when you transfer to your limited company.Limited companies don't pay capital gains tax, they would have to pay corporation tax at 19%... I'm not sure how the whole thing works but it seems to be popular.
Limited company structure keeps landlords afloat
Landlords looking to make ends meet amid a tight tax structure and rising interest rates are increasingly turning towards company structures, and many are growing their portfolios.
The article you shared primarily refers to new purchases and portfolio landlords - agree it makes more sense there but your original post referred to transferring.
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Especially when bonds/etfs/savings accounts etc pay so much atm.
Minor at best.
Much debate on 2-3 Yr forecast. But most agree it will be a slow come down
They are forecasting a small drop in 2024, and another drop in 2025...
Mortgage Rates & House Price Forecasts 2024
The Bank of England kept the Bank Rate at 5.25% on 14 December - the rate has been frozen since rising to a 15-year high of 5.25% in August. This has l
www.forbes.com
I'm in a similar situation, I live and work in manchester and after 6-7 years of renting, I got a mortage for my own house in manchester. 6 Years later I'm still here.. but looking at places back in my home city of Derby.
a few things made me take the step, the fact that I was reaching the age that some mortage lenders would want "extra assurance" before they would lend..
I'm now thinking the of paying off my current place which I could do in the next 9 years then looking at buying somewhere in Derby to rent out until I move back and retire there and rent out the current place via a completely managed estate agent so I don't have to lift a finger.
House buying is one of the PITA ever, the amount of houses that you have to view and estate agents not doing what they paid to do makes the issue even harder.
The thing with your situ is that are house prices in London are more likely to raise faster than Birmingham? Also the house/area that you're buying in Birmingham may not be the house/area that you want to live in x number of years... it may be better to buy in London now and sell up and get something in Birmingham later.
Thanks 413x and Slinxy.
I can get a 2 bed flat in London at a push but i'm concerned if i lost my job would i be able to keep the London flat. I'm definitely not going to retire here. I'm 43 now, i see myself here for 5 years tops. I might leave in 18 months as it's ok but not my thing.
My thinking was i can keep a chunk down on a 2bed flat in Brum, in an area i'd want to live in, and rent it out, someone pays the mortgage from then on and i make a little on top and i'm not tied to London.
I think i will wait to see what the markets like in spring.
EDIT - Also considering putting a 25% deposit down on 2 separate flats in Brum rather than putting 50% down on 1.
I can get a 2 bed flat in London at a push but i'm concerned if i lost my job would i be able to keep the London flat. I'm definitely not going to retire here. I'm 43 now, i see myself here for 5 years tops. I might leave in 18 months as it's ok but not my thing.
My thinking was i can keep a chunk down on a 2bed flat in Brum, in an area i'd want to live in, and rent it out, someone pays the mortgage from then on and i make a little on top and i'm not tied to London.
I think i will wait to see what the markets like in spring.
EDIT - Also considering putting a 25% deposit down on 2 separate flats in Brum rather than putting 50% down on 1.
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It's swings and round-a-bouts... If you lost your job, it's more likely that you will find another job in London or in Birmingham? Will you be able to keep the flat in Brimingham? Is there's something stopping you renting out the flat itself in London? a lot could happen in 5 years.
I'm just happy that I have one year less mortage to pay and I can get a lot more house back home, if I need to sell my current one.
Yeah it is swings and roundabouts but i'd find having the lower mortgage payment more appealing i think!
Sounds like you are making good headway into your mortgage, love to hear it
The other obvious risk to your plan is bad tenants and there are a lot of them.
You’ll also be paying two lots of agents fees, one lot to your agent to manage your property (realistically you are not going to able to manage it remotely) and another lot (indirectly) to the agent who’s managing the property your are renting.
A flat in London is probably more desirable than a flat anywhere else in the U.K. so in theory it will be easier to shift when the time comes. Flats are generally much harder to shift outside of London because you can usually get a house for not much more.
If you are going to buy something to rent in the midlands and then rent in London, I’d buy a house rather than a flat ‘back home’.
You’ll also be paying two lots of agents fees, one lot to your agent to manage your property (realistically you are not going to able to manage it remotely) and another lot (indirectly) to the agent who’s managing the property your are renting.
A flat in London is probably more desirable than a flat anywhere else in the U.K. so in theory it will be easier to shift when the time comes. Flats are generally much harder to shift outside of London because you can usually get a house for not much more.
If you are going to buy something to rent in the midlands and then rent in London, I’d buy a house rather than a flat ‘back home’.
Some serious calculations needs to be done..
Like the post before me is saying, your doubling your risks and costs in certain areas.
what are your short terms and long terms goal? It may be worth speaking to a financial advisor.
The interest payments of paying a property with a mortgage is a killer. The percentage is calculated at the start of each month and divided by 12 and added to the amount owned. The cheapest way of buying is to put down as much deposit as possible and pay off the mortgage as soon as possible with over payments.
Some people believe it’s better to invest in the stock market than to use the money to pay off the mortgage. Which is true in the past as mortgage rates was around 2.5% and the stock markets return around an average 9%. But there’s no guarantee what the stock market returns in a given year or a period of years and with higher mortgage rates, it may be better and certainly more satisfying to pay of the house sooner. Also after paying off the mortgage, there’s the opportunity to use the funds of the mortgage to buy a second property or to take higher risks for better returns in the stock market.
One thing is for certain, if you just leave the cash in a normal account, inflation will eat away at it.
One of my friends was telling me that there are buy to lease schemes; Where you buy a property then lease it out to someone to rent, they the ones that takes the risk on in regards of the management of the property.
And lease to rent schemes, where you lease a property from someone and take on the risk of managing the property.. in terms of its maintenance and finding someone to rent it. This sounds crazy.
What I’m doing at the moment is putting my eggs into serval baskets.. a percentage into the stock market and a percentage into paying off my house sooner. And the returns from my managed accounts; my pension and vanguard has returned higher than the interest from my mortgage. But the account that I manage/mess about with myself is lower than my mortgage.
The other thing that I’m doing is investing in REITs, which is buying share into real estate companies that rents/leases out properties to companies and people. So basically I’m buying a percentage of a property portfolio and getting a percentage of those companies profits. They do all the buying/selling of properties and the management. It’s far more liquid than buying a property but you don’t get the advantage of leveraging and like all shares can go down if a load of shares are dumped.
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Putting properties in a company shell can mitigate inherence tax also mitigate extra 3% SD for the kids if they want to get their own house.
There are benefits for moving to LTD shell but there is a cost. Whilst the saving would only be realised if A) property is mortgaged B) you are looking to pass on the property to your family members without incurring inherence tax.
If the property is owned outright etc there is no reason to operate it out of a LTD shell. It’s easier way to div up the rental income amongst family member. Setup a property management company and then pay the rental towards that company and divide management company profit into income/dividend to family members to minimise tax exposure.
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Thanks Slinxy for your post. Very informative and helpful.
I may just get a 2bed flat in London then. Take in a lodger (900-1k a month) extra and put savings back into the stock market and find relative safe companies that pay dividends and keep reinvesting them
I may just get a 2bed flat in London then. Take in a lodger (900-1k a month) extra and put savings back into the stock market and find relative safe companies that pay dividends and keep reinvesting them
Soldato
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Just to add that slinxy explanation for interest is not normally correct.
The vast majority of domestic mortgages now charge daily interest.
The vast majority of domestic mortgages now charge daily interest.
Soldato
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Hopefully rates have topped out as inflation starts to fall, not that I've noticed. Remortgaging in three months, wish me luck.
My mortgage provider Britannia via Co-op is still monthly, I believe unless people are making anything else than monthly payments, monthly payments is slightly cheaper.