- 07979198280
- info@murraypropertyholdings.co.uk
There are many known advantages of investing in property via a ‘Limited Company’ status.
First up, we have;
Tax Efficiency
There are significant tax advantages to investing in property via a Limited company, particularly if you are a higher rate tax payer. Any profits you make from rental income are, however, subject to Corporation Tax. For 2024-2025, the Corporation Tax rate is set at 25% for any profits above £250,000, with lower rates applicable for smaller profit margins..
Unlike landlords who face significant restrictions when it comes to deducting mortgage interest (only 20% of finance costs can be claimed against taxable income) limited companies can deduct the full amount of their finance costs from their rental income. This means ANY interest that you pay on loans and/or mortgages directly reduce the taxable profit of the company. Making the Limited Company option an attractive option for property investors looking to maximise returns.
Inheritance Tax
If you own your property via a Limited Company, there are more flexible options for inheritance planning. This way, shares in the company can be transferred to your family members, and they will potentially qualify this way for business relief on Inheritance Tax (IHT), reducing the IHT liability (in comparison to just passing on the property directly).
Limitation of Liability
Investing via a ‘Limited Company’ provides some limited liability protection, this means your personal assets are generally protected if the company incurs debts or legal issues related to its property investments. This separation is a layer of protection in terms of risk.
Profit Distribution
You can have, via a Limited Company, greater flexibility on how profits are distributed. Meaning you can choose if you want to reinvest any profit back into your business, or if you want to pay them as dividends.
However, there can be a few disadvantages to investing via a Limited Company;
Fees
You might have higher fees, because setting up and maintaining a Limited Company has accountancy fees, registration fees, etc. Potential legal costs might also be associated with compliance and regulations. For those with maybe only 2 or 3 properties in their portfolio, these costs might outweigh the benefits. There are strict obligations to file annual accounts and submit Corporation Tax returns to HMRC.
Mortgage Lending
Limited Companies are presented with fewer mortgage options, because lenders perceive Limited Companies ‘higher risk’. Lenders also charge higher interest rates for buy-to-let mortgages held within a Limited Company.
No Capital Gains Tax Allowance
When you come to sell any properties that are owned by your Limited Company, there is no annual capital gains tax allowance (for individuals there is an exemption of £3,000 applicable before calculating any tax owed on capital gains).
If you want to have an informal chat with our team, drop us an email at:
info@murraypropertyholdings.co.uk to book a time to chat.
#limitedcompany #ltdcompany #propertyinvestment #propertyinvestor #investinproperty
Sign up here to our informative LinkedIn Newsletters (below – hit gold with the gold button!)
We bring you all the latest in general property news, rates, eGuides, calculators and much more, you won’t be disappointed.
Email: info@murraypropertyholdings.co.uk
Call: 07979198280