Tax efficient property ownership
If you are considering buying a buy-to-let property, owning it through a limited company has significant advantages.
We can form this company for you and advise on taxation and obtaining finance for property purchases.
Our corporate secretary service deals with all required share allocations and related matters.
Frequently Asked Questions about Corporate Property Ownership
Q: If my limited company owns a property, do I need to declare rental profits on my tax return?
A: No. Any rental profits generated do not have to be entered on your personal tax returns, or taken, if you own a property through a limited company.
Q: If my limited company owns a property, can I get tax free dividends?
A: Yes. From April 2018, dividends can be paid tax-free up to £2,000 per annum. We can also allot shares in the company to family members, so dividends are tax efficient.
Q: If my limited company owns a property, do I need to pay the extra stamp duty for a second property?
A: No, a limited company does not have to pay the extra stamp duty (stamp duty land tax surcharge).
Q: If my limited company owns a property, what impact does this have on capital gains tax or mortgage interest relief?
A: All employers must provide and contribute to a workplace pension scheme operated through their PAYE payroll.
Any employee who usually works in the UK is between 22 and state pension age and earns over £10,000 a year must be automatically enrolled in your workplace pension scheme.
Q: I’m a director. Do I need to be in a payroll scheme?
A: If a limited company owns a property, the capital gain is taxed at 19%.
However, if you own it directly, your capital gains are added to other income, and once the 40% high rate threshold is reached, will be taxed at 28%.
Owning a property through a limited company also means that you can leave shares to beneficiaries, which will avoid capital gains and tax liabilities when the property is sold.
Conversely, properties owned directly would form part of your assets and be taxed at the highest applicable tax rates.
Moreover, from April 2017, mortgage interest relief has been restricted to the basic rate of tax, currently 20%. Higher-rate taxpayers can no longer claim high-rate tax relief. However, limited companies are unaffected as they are liable for corporation tax.
Lastly, when you sell a property owned by a company, any profit can lead to a reduction in tax thanks to indexation.