Property Tax - Fiscal help for student children How much tax could you save as a landlord on your property?
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Property Tax - Fiscal help for student children Should my company buy investment property?
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The answer will depend on your marginal tax rates for income and gains compared to corporate tax rates and reliefs, as well as your long term plans for property investment.

If you already have a trading company that has accumulated some surplus funds, investing in a buy-to-let property can make commercial sense, providing the company can secure a mortgage for the balance of the purchase price. The company will pay corporation tax at 19% to 30% on the rental profits, where as you would pay income tax on the same profits at 22% or 40%. But to get your hands on the cash you need to extract value from the company in the form of dividends, salary or other benefits, which will normally generate an additional tax charge for you personally.

If you plan to churn your investment properties every few years to realise the capital profit that has built up, the tax charges are likely to be lower if you hold the properties personally. The company does not have an annual capital gains exemption and can’t reduce the capital gain with taper relief. However, if you want to hold the investment property for some years until you retire, using a company has some advantages.

As a corporate landlord you may find it easier to open trade accounts with suppliers. If your company is already VAT registered due to the existing trade, it can reclaim the VAT charged on the property related purchases, as long as the VAT on those items does not average out to more than £625 per month. Residential property is exempt from VAT so great care is needed over VAT returns when the company also has sales bearing standard rate VAT.

If you are considering the corporate route please talk to us first to explore the tax effect of each option.

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