We work with landlords who have incorporated their property businesses, handling corporation tax returns and offering tax planning strategic advice.
Hi, I’m Simon.
I’m the Director of UK Landlord Tax and I’m also a landlord, just like you. One of the reasons property makes such an attractive investment is because of its potential to provide financial rewards not only for you but also for your family after you’ve gone. Inheritance tax can eat away at that legacy but there are ways to reduce its impact. Talk to us to find out more.
Limited companies pay corporation tax at just 19% on profits up to £50,000. From 1st April 2023 the first £50,000 will be taxed at 19%, the next £200,000 will be taxed at 26.5% and the remainder will be taxed at 25% (provided that you only control one company) compared with personal rates of tax starting at 20%, then 40% and a top rate of 45%. By not withdrawing the profits a limited company offers more flexibility. After paying the corporation tax, the retained profits could be used to pay down any loans or used for deposits on further properties.
A limited company offers more planning opportunities for inheritance tax planning. How? By setting up a Family Investment Company (FIC) structure we can ensure that you protect your property wealth for the next generation and your bloodline, yet keep full control and access to income for the rest of your lives. See how we do this here.
Full tax relief is given for mortgage interest. This is now one of the main reasons why higher rate taxpayers are choosing to use a limited company.
With the right implementation we can help a family with one child extract up to £18500 in tax free income per year. By using the tax free dividend allowance of £2000 each plus your child’s own personal tax allowance it pays to speak to a specialist property tax adviser like ourselves.
We’re not big but we’re not small either. So you will get a personal dedicated property tax accountant to help you on your property owning journey. When it comes to fees, let’s just say we know we’re one of the most competitive advisers out there. So if you’ve gone and spoken to someone else get in touch and compare what we have to offer before you do anything else.
Limited companies have to make corporation tax returns to HMRC and file accounts with Companies House. We can do that for you, taking all the hassle out of the process. We’ll assist you in getting it right and filed on time, so you can focus on the success and growth of your business.
From follow-up questions to full-on investigations, we’ll be there to manage conversations with the tax authority, talking their language to keep things running as smoothly as possible.
With strategic business tax planning built on years of experience with property tax, we’ll find and claim every tax relief your property business can claim. Even if the calculations are complex and the paperwork is tricky. The less tax you pay, the more you’ll have to reinvest in growing your portfolio.
For a limited company our fixed fee is just £575+VAT for the annual accounts and tax compliance. If you are lucky to have more than 1 property, give us a call.
Setting up fees
Standard limited company incorporation – from £85+VAT
Family Investment Company incorporation – Contact us for a fee quote
If you are a higher rate taxpayer and own property in your personal name you will pay income tax at 40% (or higher) on your rental profits. By holding property in a limited company the same profits are taxed at 19%. The tax saved can be kept in the company and used to pay off any mortgages or fund a deposit for additional property purchases.
In addition as a higher rate taxpayer you no longer receive full tax relief on any mortgage interest on properties held in your personal name. The tax relief on mortgage interest is restricted to 20%. A company still gets full tax relief.
At the moment you can also withdraw up to £2000 in tax free dividends from a limited company.
As a higher rate taxpayer (provided that you total income is less than £150,000) you could also receive up to £500 of interest tax free from your company for loans/deposits you have given the company to purchase property.
Yes, but you need to be very careful before doing so. A transfer is deemed to be the same as a sale at market value by HMRC and you should therefore consider the following:
What are the additional costs of a company mortgage to pay off any outstanding loan. As well as finance charges loans to limited companies can be more expensive.
Will there be stamp duty payable? If the property is worth more than £40k the higher rate surcharge of 3% applies. Standard rate of SDLT will also apply.
Will there be a capital gains tax liability?
The combination of the three factors could be very expensive and we advise that you should not undertake this without getting professional advice.
Whilst a transfer might be expensive purchasing a property from the outset is likely to be more beneficial.
As a shareholder/director of your property company you can extract funds as a follows:
Pay out dividends from post tax profits. The first £2000 is tax free if you have no other dividend income
Pay yourself a salary. If you have no other income you may want to draw a salary. However, the salary would need to justified to be allowable for corporation tax purposes. If a letting agent was managing the properties for you then it would probably be difficult to justify the payment of a salary.
Payback a loan that you made to the company. This would be tax free.
Receive interest on loans/money owed to you by the company. £1000 tax free for basic rate taxpayers and £500 for higher rate taxpayers (income up to £150,000).
Yes. Ever since April 2015 mortgages for limited companies and the number of lenders have steadily increased and continues to do so. However, the rates of interest charged on a mortgage to a limited company is still comparatively higher than that charged to borrowings by an individual. Although, some lenders now charge the same rate regardless.
A directors loan account (DLA) is where you keep track of all the money you either borrow from your company, or lend to it. If the company is borrowing more money from its director(s) than it is lending to it, then the account is in credit. It is not advisable to borrow money from your company as this can lead to various tax charges.
Yes. If you have loaned the company money for a deposit or other purpose you are entitled to charge the company a commercial rate of interest for the loan. Higher rate taxpayers can receive £500 and basic rate taxpayers £1000 tax free each year.
A limited company does offer advantages when it comes to IHT. By setting up a Family Investment Company structure you can mitigate future IHT. Briefly, a company is set up with 2 class of shares. A and B shares. You own the A shares which have the right to dividends and voting rights.
The B Shares have entitlement to all future growth. Thus giving away value whilst still retaining controls through directorship.
Any growth on the investments will be largely outside of individuals’ estate for IHT purposes.
The implementation of this type of tax structure can be complex and you should seek advice from a professional adviser with the adequate level of knowledge and expertise in these matters. For further information please see the following …. Or get in touch to discuss your situation.
SPV – Special Purpose Vehicle
An SPV is a generic name for ANY entity that you choose for a particular purpose. An SPV can be a limited company, an LLP or partnership.
Limited companies can be an SPV and many lenders require you to set up a limited company SPV when purchasing property through a company.
Limited companies pay corporation tax at 19% on profits. From 1st April 2023, the Government has proposed that the first £50,000 will be taxed at 19%, the next £200,000 will be taxed at 26.5% and the remaining profits will be taxed at 25%. Where companies are under common control the bands are shared equally between each of the associated companies.
Yes. In the current tax year a shareholder in a limited company can normally receive up to £2000 of dividends tax free.
A limited company is not required to be VAT registered by default. However, it becomes mandatory for a limited company to register for VAT if its annual turnover exceeds the VAT registration threshold, which is currently £90,000 from 01st April 2024 (as of 2023/24 tax year). Once registered, the company must charge VAT on its taxable supplies and submit regular VAT returns to HMRC. It is important to note that there are certain benefits and considerations associated with VAT registration for limited companies, and it is advisable to seek professional advice to determine the best course of action for your specific circumstances.
Setting up a limited company might work for you or it might not. Explore your options with one of the UK Landlord Team and get support, advice and challenge to help you reach the right decision and keep your tax bill under control.
People often decide to incorporate once they’ve got a few rental properties and want a more efficient way to manage the income. We’ll help with everything from statutory obligations such as VAT returns to advice on salary vs. dividends.
With intelligent analysis and sensible tax planning, it’s likely we can help reduce your corporation tax bill straightaway. From unclaimed tax reliefs to overlooked allowances, we’ll find every opportunity to save you money.
''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''
Via FreeIndex
Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG
UKLandlordTax.co.uk is the trading name of Thandi Nicholls Ltd Accountants Registered Office: Creative Industries Centre, Glaisher Drive, Wolverhampton WV10 9TG.
Registered in England. Company Number 7319439. Director S S Thandi BA
