If you are thinking about a potential foray into the world of property investment, you may well be totally confused about how to hold your future investment property. The media is awash with the idea that investing through a Limited Company is the way to go.
On balance, are they right?
Well, Yes and no…………….a balanced answer!
It all depends on individual circumstances.
So why all this media interest in Limited Company Buy to Let?
One word; Tax.
Whilst using every legal opportunity to avoid paying too much tax could be a good idea, it’s very important to remember an old saying “don’t let the tax tail, wag the investment dog”.
In other words don’t make the mistake of getting your tax right and your property wrong!!!!
Until recent times the market for Limited Company buy to let was relatively small. This was due mainly to the lack of availability of the very low cost buy to let mortgages that individuals were enjoying.
The tax advantages of limited company, were outweighed by personal tax relief and the lower finance costs associated with personal buy to let investment.
The Chancellor in his wisdom has announced changes to be phased in for personal buy to let investors from 2017 to 2020. These changes limit the amount of interest that can be offset against rental on a buy to let property, and in effect higher rate tax payers will only receive basic rate relief.
At present this change does not affect Limited Companies holding buy to let property. In addition from April 2017 the first £5000 of Dividends payable to shareholders from a company will be tax free.
All seems like a good reason to invest through a Limited Company then?
Well, we are back to yes and no!
Of course the tax system can be used in any way the Treasury sees fit, so there could easily be special tax rules brought in that apply to SPV companies that hold property.
After all the proposed tax changes according to the Chancellor are designed to level the playing field, giving residential and in particular first time buyers a chance at property ownership.
Now if the Ltd company buy to let market really takes off, who knows what the Chancellor might do?
We don’t know what the Chancellor has planned for Limited Company buy to let investment, however what we do know is that the market in terms of lending is opening up to Limited Company buy to let.
There is now more real choice and investing in a residential property through a Limited Company must now be seriously considered by some.
Enhanced Wealth Ltd are Independent Mortgage Brokers and have many years’ experience advising in the Limited Company buy to let mortgage market.