If you’re new to property investing, or have been in the game for a while then you will have no doubt heard about the benefits of purchasing through a limited company instead of your personal name.
However it’s not that easy to say as everyones circumstances are different, and what works for me, may not work for you. – In this article we’re going to be looking through the advantages and disadvantages of buying property through a Limited Company.
Limited Company: Advantages
Tax Relief on Mortgage Interest – This is one of, if not the main reasons that people stopped buying in personal name as up until the introduction of Section 24, back in 2017, investors were able to offset their mortgage interest as a business expense. This is still possible however, if you invest through a limited company, the limited company can claim tax relief on the interest that you pay.
Finance Raising – If you’re in the fortunate position to have a large portfolio held within your limited company it can be easier to raise finance as limited companies can be often seen as more credit worthy than individuals.
Options – If you own property through a limited company, you have more flexibility in how that property can be used. Between selling, renting the property out or even choosing to use it as your home office. It’s also easier when it comes to selling your portfolio as instead of selling each property individually you can sell the limited company, which can be a very attractive proposition for buyers.
Limited Company: Disadvantages
Set Up and Running Costs – Setting up and running a limited company in turn can cost more than the saving you’re making on the tax relief, it is worth considering the cost of purchasing in your personal name or purchasing through a limited company.
Lack of Government Support – It’s safe to say that property investors have never been particularly favoured by governments through the years, if you own property through a limited company you may not be eligible for grants and tax breaks.
Tax Returns – Whether you own property in your personal name or through a limited company, tax returns will be a non negotiable, however when you own property through a limited company, you’ll need to file a more complex return. (However, a good accountant will be able to help you with this)
Considerations
Tax Rate – If you’re a higher rate tax payer, then the tax relief on the mortgage interest can be a big saving.
Portfolio Size – If you have a large portfolio, then it may be easier to raise finance if they’re owned through a limited company.
Personal Circumstances – The decision of buying through a limited company is a complex one. There are advantages and disadvantages to both. Speaking with a good accountant is a wise idea before making any decisions. The decision is a personal one, there is no correct or incorrect answer and the best decision for you is circumstances dependent.
To get started on your property investment journey, get in touch with me today.
