Hi, I’m Simon.
I’m one of the Directors of UK Landlord Tax and also someone who believes in the power of property. It’s always worth thinking strategically about the ownership structure of your landlord business, especially when it starts to become a serious job rather than a sideline. Setting up a limited company is a big step but can be a very smart move. Talk to us today to find out why.
Your property business should be rewarding
We make life easy for landlords with limited companies. Here’s how we do it…
Taxes at their lowest rate
The corporation tax rate for limited companies is 19% on profits up to £50,000. As of April 1, 2023, the first £50,000 of income will be taxed at 19%, the next £200,000 at 26.5%, and the remainder at 25% (if you control just one company), compared with personal rates of tax starting at 20%, 40%, and 45%. By not withdrawing profits, a limited company provides greater flexibility. It is possible to use any retained profits after paying corporation tax to pay down any loans or to make deposits on additional properties.
Protect your family’s wealth and reduce your exposure to inheritance tax
When it comes to inheritance tax planning, a limited company offers more options. How? We can help you set up a Family Investment Company (FIC) that protects your property wealth for your children and grandchildren while giving you full control of your income. See how we do this here.
Mortgage interest costs can be claimed in full
The interest on mortgages is fully tax deductible. Increasingly, higher rate taxpayers are choosing to use limited companies for this reason.
Pay for lifestyle expenses, child care, and education with tax-free income
It is possible for a family with just one child to earn up to £18500 in tax-free income every year if the right implementation is done. A specialist property tax adviser like ourselves can help you use the tax-free dividend allowance of £2000 per child plus your child’s own personal tax allowance.
Personalised guidance for your needs
By choosing to work with a property tax accountant you will get a personal dedicated property tax accountant to help you on your property-owning journey. We know we are one of the most competitive advisers out there when it comes to fees. You should compare what we have to offer before making any further decisions. If you’ve spoken with someone else, get in touch with us and see what we have to offer.
Tax returns for corporations
As a limited company, your property business has additional statutory responsibilities, such as filing annual tax returns with HMRC and filing accounts with Companies House. It’s no problem at all for us to do that for you.
It’s all about getting it right the first time
Our experience in preparing corporation tax returns day in and day out allows us to understand all the complexities and opportunities available. As a result of working with us, you won’t have to worry about dealing with HMRC’s queries. We’ll deal with them for you by speaking the taxman’s language.
Claiming important reliefs
Knowing which allowances and reliefs you’re entitled to claim is the key to keeping your company’s tax bill under control.
Annual accounts and tax filing
For a limited company with one property, our fee for the annual accounts and the tax compliance is just £575+VAT.
Setting up fees
Standard Limited Company – from £85+VAT
Family Investment Company – Contact us for a fee quote
Download our FREE UK Property Tax Guide.
A simple guide to property rental income tax and property capital gains tax for UK Landlords.
Current tax rules
Dealing with HMRC
How our tax system works outside of PAYE
Frequently asked questions
Will owning property through a limited company save me tax if I am a higher rate taxpayer?
Higher rate taxpayers who own property in their own names will pay income tax at 40% (or higher). The same profits are taxed at 19% in a limited company (this rate may increase after 1st April 2023 for profits over £50,000 or more). Using the tax savings, the company can pay off any mortgages or fund a deposit for additional properties.
Additionally, you are no longer eligible for full tax relief on mortgage interest on property held in your name as a higher rate taxpayer. There is a 20% limit on the tax relief on mortgage interest. It is still possible for a company to get full tax relief.
It is also possible to withdraw tax-free dividends from a limited company up to £2000.
For any loans or deposits that you have given the company to purchase a property, you can also receive up to £500 interest tax-free as a higher rate taxpayer (provided your total income is less than £150,000).
Do I have the option of transferring my properties to a limited company?
This is possible, but it must be done with great caution. Transfers are considered to be sales at market value, so the following considerations apply:
To pay off any outstanding loan, what are the additional costs of a company mortgage? Limited companies may have higher financing costs.
Does stamp duty apply? In addition to the standard SDLT rate, a higher rate surcharge of 3% applies to properties worth more than £40k.
Is there a capital gains tax due?
Without professional advice, combining these three factors could lead to a very expensive tax bill.
It may be more advantageous to purchase a property from the outset rather than transfer in.
What are the steps I need to take in order to take income from a limited company?
You can extract funds from your property company as a shareholder/director in the following ways:
Dividends are paid from after-tax profits. If you don’t have other dividend income, the first £2000 is tax-free.
You should pay yourself a salary. A salary may be a good idea if you don’t have any other income. In order to qualify for corporation tax benefits, the salary must be justified. You would probably have trouble justifying paying a salary to yourself if a letting agent managed your properties.
Repay a loan you made to the company. Taxes would not apply to this.
The company pays you interest on loans or money owed to you. A basic rate taxpayer can claim a tax exemption of £1000 and a higher rate taxpayer can claim a tax exemption of £500 (income up to a top rate of £150,000).
Is it possible for a limited company to obtain a mortgage, what are the additional costs of this?
Yes, of course. Since April 2015, the number of lenders and mortgages for limited companies has steadily increased. In spite of this, a limited company mortgage still incurs higher interest rates than an individual’s mortgage. It is important to note, however, that some lenders charge the same rate regardless of the type of mortgage.
How does a director's loan account work?
An account for directors loan (DLA) keeps track of how much you borrow from or lend to your company. The account is in credit if the company borrows more from its directors than it lends. The tax consequences and penalties of borrowing money from your company makes it often unwise to do so.
Is it possible to charge my company anything for the deposits I paid towards the purchase of the property?
Yes, it is. A commercial rate of interest can be charged for loans that are made to the company for deposits or other purposes. Every year, higher rate taxpayers can receive £500 tax-free and lower rate taxpayers can receive £1000 tax-free.
Is it possible to reduce IHT with a limited company?
There are some advantages to being a limited company when it comes to IHT. Family Investment Companies can be set up to mitigate IHT in future years. In brief, a company consists of two types of shares. There are shares A and B. As the owner of the A shares, you are entitled to dividends and voting rights.
All future growth belongs to the B Shares. In this way, the director retains control while giving away value.
As far as IHT is concerned, the growth on the investments will largely be outside of individuals’ estates.
It can be difficult to implement this type of tax structure without the assistance of a professional advisor who has the necessary expertise and knowledge in these matters. Please see the following for further information. You can also contact us for more information.
What is an SPV?
SPV – Special Purpose Vehicle
A SPV is a generic term for any entity that you establish for a particular purpose. SPVs can be limited companies, limited liability partnerships, or partnerships.
When purchasing property through a company, many lenders require you to establish a limited company SPV.
How much tax do limited companies pay?
Profits of limited companies are taxed at 19%.
The Government has proposed taxing the first £50,000 of profits at 19%, the next £200,000 at 26.5%, and the remaining profits at 25% from 1st April 2023. Associated companies that share common control share the bands equally.
Is my company able to generate tax-free income?
Yes, this is correct. Limited company shareholders are normally able to receive tax-free dividends up to £2000.
Let‘s talk about property tax today
When it comes to fixed-fee tax returns for UK landlords, nobody does it better.
Our limited company tax services are for you if you…
Have a growing portfolio of rental properties
Our team of experts can give you advice on how to incorporate if you have gone from one apartment or house to several and are considering the possible tax benefits. Don’t make an uninformed decision on tax without all the facts at hand. Instead, speak to one of our specialists today.
Are pivoting to property from another field
In the event that property started out as just one part of your business but has grown into your primary business, you need an accountant who specialises in property tax.
Want support with core finance functions
Let us handle your limited company’s accounting, reporting, and returns to HMRC – and we’ll even lower your tax bill along the way.
Generous with their time and detailed in their advice
''I am a UK based landlord who sought advice from UK Landlord Tax relating to the structuring of my limited company and the set up of a Family Investment Company (FIC) which Manjinder offered invaluable advice on. UK Landlord Tax have been super responsive, generous with their time and detailed in their advice. An extremely rare experience in today's fast paced business world. Majinder could give me chapter and verse on the implication of my children's US citizenship relating to the FIC which was an extra bonus. As far as value for money goes I couldn't have asked for more. Thank you''
SANDRO G - JUNE 2023