Thanks for the above information.
I am myself subject to 40% effective tax rate while my wife is unemployed. So I want to use her personal allowance.
Following is my proposed structure (me being an accountant too but not a tax expert).
- I will set up the company and I will be the sole owner and director. I will give personal guarantee to the company for its liabilities.
- My wife will give a loan of £40k to the company to be used as a deposit for the buy-to-let mortgage. Interest will be paid on this to her which will be CT tax allowable. For her, this income will be within her personal allowance.
- My wife will be responsible for property management and will draw reasonable salary from the company against tax allowable for CT purposes. Again for her this will be within her personal allowance. I will register her for PAYE.
- Bank will take a charge on the property and give company the loan amounting to £110k to buy the property in the name of company. The interest paid on mortgage will be allowable for CT tax.
- The net income of the company after all deductions (including the interest and salary paid to wife, 10% wear and tear and other allowable expenses) will be subject to 20%. I am expecting this to be a really small amount as per my calculations.
- Once this is in place, I will convert the loan of my wife in to shares so she becomes majority owner of the company. She will be able to draw dividend income within the personal allowance.
Overall my plan is to keep the income withdrawn by my wife to be within her personal allowance of approx £9k a year so there will be no tax payable be her.
Question I have for you:
1. Do you see any additional tax implications in the above that I am missing out?
2. Salary drawn by my wife and the interest paid to her on the loan is allowable deduction?
3. Will converting loan into shares for my wife attract any additional tax?
4. If I sell the property how much tax will be payable on the capital gain?
Is it the standard CT rate? Also when I will dissolve the company or take out this gain as dividend will this be subject to tax again? (assuming it is over my wife's personal allowance limit).
5. If I have to put my home address as a registered address do I need to take a home insurance that includes that a business is being run?
Thanks for your help