What are the benefits of owning property through a Buy to Let limited company?
Offsetting 100% Mortgage Interest - Private landlords have had their tax relief allowances cut significantly in recent years. These changes do not affect limited companies.
£2,000 tax-free dividend relief - The Dividend Tax Credit means company shareholders can potentially take £2,000 per year in dividends tax-free.
Legal Separation - The company and its finances are legally separated to the people who run it – this limits the level of personal liability an individual can face.
Profits can be reinvested. Its possible to grow a buy to let portfolio more quickly through a limited company. This is because there is no income tax on profits retained within the company, so there is more cash to reinvest. Corporation tax is payable on trading profits, but this is lower than higher rate income tax.
Tax benefits. As a private landlord with a property in your own name, you will be liable to pay income tax on your rental income. This is because the money you receive for rent is viewed as personal income by HMRC. If you have another job, this could mean that your rental income pushes your income into a higher tax band, leaving you liable to paying a higher rate of tax.
Purchasing your buy-to-let property as a limited company could enable you to pay less tax. This is because rental income from properties owned by a limited company is subject to corporation tax, rather than income tax. This rate currently stands at 19% for the 2022-23 tax year. This means that for many people, it is more tax efficient to purchase your buy-to-let property through a limited company.
Stamp Duty
If a property has been purchased by a limited company, the property is then owned by the company rather than the individual. This means that if you want to transfer ownership of that property, for example upon your retirement, you can simply transfer ownership of the limited company.
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