When Not to Invest in Buy to Lets Through a Limited Company

In light of the recent tax relief changes, we talk about Ltd Company borrowing with clients A LOT at Mortgages for Business. Whilst there is no doubt that this is the right way to invest for many, there are still those who choose not to purchase through a Limited Company. Jeni Browne offers her thoughts on 3 key reasons why you might still want to invest in your personal name…

TAX POSITION
The biggest driver for people opting to use a Ltd Company for their buy to lets is the way you can offset your costs and therefore how much tax you will pay. This is mostly beneficial to those whose total income, including gross rental income, pushes them into the 40% tax bracket. So, whilst this benefits many landlords, there are also many who do not fall into this group and thus would not benefit in the same way.

MORTGAGE COSTS
Although Ltd Company mortgage rates have come down considerably over the last few years, there is still a difference between personal and Ltd Company borrowing, especially on standard properties. Some borrowers (irrespective of the tax implications) are more focused on the cost of borrowing and will transact in their personal names in order to keep the mortgage costs down.

TOO MUCH HASSLE
For some, the idea of setting up, and then running a Ltd Co feels inconvenient or possibly, daunting, and they simply take the view that they prefer to borrow personally as this is the simpler option.

To find out whether you would benefit from using a Limited Company for tax reasons, you need to speak to an appropriately qualified Tax Adviser or Accountant. We are able to work with investors whether they choose to do so through their own name, through a company, or, indeed both. If you are weighing up your options, our brokers are always happy to run cost comparisons without any charge to you, so that you can do your due diligence and make an informed decision.

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NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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