There is a common conception that using a limited company to both buy and own buy-to-let property is the fastest route to maximum profitability, especially after landlords lost certain tax reliefs earlier this year. However a new study questions this thinking and suggests using a limited company only becomes viable once you have four or more properties.
The principal reasons a company may not be the best option are:
But what does that mean in real terms? Private Finance, an independent mortgage broker, has constructed several scenarios to answer that very question.
The first scenario is based upon a landlord with an annual salary of £35,000 and an annual rental income of £11,010. If they buy-to-let under a company structure they would take home 4% less (just under £1400) than they would if they bought it as an individual.
The second scenario is based upon a landlord with 5 properties. Again they have a salary of £35,000 but an annual rental income of £55,050. In their case they would take home almost £1000 more if their portfolio was owned by a limited company.
Although these scenarios are illustrative and support the heightened scrutiny rightly being levelled at holding property under a limited company structure, the fact is the recent changes to the way landlords are taxed means every case needs to be examined separately.
Before you start to consider which would be best for you, ask yourself:
With so much to consider when deciding whether company or private ownership is the best option for you, it is absolutely vital you take specialist advice even if it is only to validate your choice. This is where our team can help.
If you have any questions relating to a property portfolio or any other aspect of your personal tax situation, contact us at and we will be more than happy to help.