Purchasing a buy to let property under a UK limited company
Purchasing a buy to let property under a UK limited company

Tuesday 28 September 2021

Are stamp duty and land tax costs higher for a limited company purchase?

When an investment property is purchased with the purpose of letting out the property to third party tenants, the stamp duty and land tax costs normally remain equal to that of personal ownership for both UK and overseas investors. This is also the case for first time buyers who are planning to let out the property.

Is the process of establishing and running a UK limited company expensive or time-consuming?

There are a number of businesses who can help investors set up a UK limited company. GetGround offer a service in which you can set up a company online in less than 30 minutes from wherever you are located. Their a service also includes the registration with Companies House; structuring the company; production of all associated legal documents; and opening a UK payment account for your financial transactions. They can manage everything related to the administration of that Limited company including accountancy; tax filing; auditing; and company secretarial services. They can also act as the registered office address.

Will it be hard to obtain finance for a UK limited company structure?

With the help of GetGround, obtaining financing is easy. With their wide range of connections who have accumulated from their years of industry experience, GetGround have access to more than 25 different lenders and upwards of 400 different mortgage products.

Is it harder to sell a limited-company owned property?

There is a couple of options for investors when you want to sell your property which is owned in a company. Investors can choose to either sell the shares in the company or the property itself.

What are some of the benefits of purchasing an investment as a limited company?

There are two main advantages of buying a property investment as a limited company when it comes to tax.

1. Owners can offset their mortgage interest against the income generated. This can lead to significant savings from which profits can be drawn easily from the company via dividend income or owner loan repayments. For overseas investors, there is 0% income tax applied to dividend income in the UK.

2. When selling the property, investors have two options. Owners can sell the shares of the limited company or sell the property out of the limited company.

When selling the shares of the limited company, owners will pay a reduced capital gains tax. Also, the incoming buyers will not need to pay stamp duty land tax. Therefore, this creates additional opportunities for the seller, who will either have a price advantage in the marketplace or can better negotiate an increase in the sales price. In the case of selling the property out of the limited company, there is no capital gains tax, but simply a flat rate corporate tax which is currently 19%.

Finally, limited companies allow for better estate and inheritance planning. Today in the UK, inheritance tax is 40% of your estate value over and above £325,000, which would include any shares in a limited company.
However, shares offer significant flexibility. They can be transferred or gifted quickly and easily, allowing for property owners to start planning for inheritance early with a goal of reducing inheritance tax in the future.

Purchasing a buy to let property under a UK limited company
Purchasing a buy to let property under a UK limited company

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