Buying a property through your Limited Company vs Personally

1. Buy to Let Properties-Buying through limited
company vs personally
There has been a large increase in the number of landlords purchasing a property in
limited companies rather than personally in the past few years. This is mainly due to
the changes in finance relief available for buy-to-let properties as set out in the 2017
budget.
In this blog, we detail the key differences in tax treatment for the two options;
Personally
Profits from renting will be liable to tax at your marginal rate of income tax,
20%/40%/45%.
From 2020/21 you will not be able to claim 100% finance cost relief when renting out
the property. All financing costs you incur can be claimed as a basic rate (20%)
reduction from your income tax liability.
On the sale of the property, the gain will be subject to capital gains tax at 18%/28%,
however, there is an annual exemption allowance – currently £12,000.
Through the LTD
If you choose to invest a property in your limited company, the profit you make will
be liable to Corporation Tax instead – currently 19%. You will also receive 100%
finance cost relief.
You will pay income tax on money extracted via dividends at a rate of
7.5%/32.5%/38.1%.
Dividends below the dividend allowance of £2,000 are tax-free.
Companies do not pay Capital Gains Tax, they only pay Corporation Tax, and so
gains are taxed at 19%. Unlike individuals, companies do not have an annual

2. allowance for Capital Gains Tax. Therefore, the advantage in this situation depends
on the amount of the gain.
The main difficulty you might come across is finding a suitable lender; the majority of
buy to let lenders will not lend to limited companies and instead want a personal
guarantee from the directors. You may also come across higher interest rates and
lower loan to value ratios.
Conclusion
It may be more beneficial for the property to be bought in a limited company if the
plan is to hold the property and profits for the long term. However, if the rental
income is needed for day-to-day living, you may want to consider how you will draw
the money from the company because this may offset the tax savings you have
made putting the property in the company in the first place.
Notes:
Tax savings are affected by other income and will depend on your personal
circumstances.
If you wish to transfer currently owned properties into a limited company you will also
be liable to sale and repurchase costs.
Rules are always subject to change and are not set in stone.
If you have any questions give us a call on 01273 441 187 or email
info@peterjarman.com