Using a limited company isolates some of the risk during the funding and purchasing of property because the company has its own legal status, assets and liabilities. Using your Limited company as a Special Purpose Vehicle (SPV) that can be used to hold multiple properties allowing landlords to grow their business quickly.
If you own and rent a property personally, you will be taxed on all income earned from the rental, regardless of its distribution. If you use an SPV, you can choose how to distribute the profits, and take advantage of any tax-free dividend allowances. Some years – you may decide to draw a larger dividend and a lower income or vice versa depending on circumstances. Or you can choose to leave the profits in the company to be re-invested in more properties.
An SPV can hold multiple properties and can be used to quickly expand your property portfolio as there is no Income Tax due on the retained profit, giving you more capital to re-invest.
If you own and rent a property personally, you will be taxed on all income earned from the rental, regardless of its distribution. If you use an SPV, you can choose how to distribute the profits, and take advantage of any tax-free dividend allowances. Some years – you may decide to draw a larger dividend and a lower income or vice versa depending on circumstances. Or you can choose to leave the profits in the company to be re-invested in more properties.
An SPV can hold multiple properties and can be used to quickly expand your property portfolio as there is no Income Tax due on the retained profit, giving you more capital to re-invest.
if you are considering using an SPV to manage your property portfolio, it is advisable to set up the SPV before buying property. If you transfer existing property into the SPV, you will incur additional costs for Stamp Duty Land Tax, legal fees, higher rate tax brackets, and potentially Capital Gains Tax. You would also have to sell the property to the SPV at market value effectively.
Using an SPV company structure for a buy-to-let property is not suitable for everyone. SPV’s tend to be used by higher and additional rate taxpayers, and those who would have been basic-rate taxpayers but have been pushed into the higher rate bracket due to the changes. Using an SPV makes a massive difference for these individuals and can significantly reduce the amount of tax paid from their rental property income.
Its our purpose to make being a property investor as easy and as profitable as possible, from mitigating things like mortgage interest tax relief to managing tax when it comes to selling, expert tax advice is always on hand.
Contact us to today to see how we can help laying the foundations of your business finances so you can start building your business.
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