LTD Company use for Landlords

Find out about why you should use a LTD company for your rental property

In recent years HMRC and the Government have been making it harder for the average person to be a landlord. This is a goal, in our humble opinion, to drive more income from rental property through to larger housebuilding companies and pension funds as the yield on offer is much greater than stock dividends and bond yields. UK Bonds in June 2020 only yielded .20%, that is 0.02p for every £, which is much less than inflation, so you are losing purchasing power every single day! With bonds offering next to no yield anymore and the likelihood of increasing yields the UK bond marketing is becoming a dream, people now need to look at other ways to secure their future income streams during retirement in an inflation protected manner.

Rental property can be a great investment if set-up and managed in the correct manor. Thomas has been a landlord since the age of 24 and has hands on experience from navigating the many changes in law, the great financial crash and the subsequent property fall out that occurred. Post COVID-19 we are likely to see further property market stress making this an interesting area of opportunity over the coming years.

In the past year or so HMRC has really hit anyone who is a Landlord and a higher rate taxpayer by removing the mortgage interest deductibility of interest payments when calculating taxable property income each year. This has hit any highly leveraged landlords much harder and landlords with higher capital mortgages, mainly in central London where yields are low and capital values high.

To help navigate this, it is becoming more useful to hold your property within a LTD company as all interest will be deductible, however, we understand this option means additional admin of owning and running a LTD company. This is where we come in, don’t let extra admin put you off as we can offer cost effective plans that more than offset the increased cost of running a LTD company versus the tax you will save using the LTD structure. This is great for new rental property purchases I hear you quip! What about my existing properties?

If you wish to move your existing property portfolio into an LTD company you will likely suffer capital gains taxes on the sale. This is a downside for changing existing structures but with property indexation and reduced property prices over the coming 2 years maybe this is a time to make changes to properties where capital gains tax will be less of an impact or can be written off over a longer term.

If you are thinking of gifting a property or passing property to your children this is great way to do so as you can navigate inheritance tax laws using this approach via using complex share structures and trusts to ensure asset control is passed over time without paying more than you need to HMRC.

If are interested to find out more about how you, please contact our team.