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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 15597
Experience:  International tax
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My wife and I own 2 properties that we rent out. We do not

Resolved Question:

My wife and I own 2 properties that we rent out. We do not plan to buy anymore but are interested in seeing if it would be worthwhile moving the properties in to a ltd company. We are both 40% tax payers and are looking to see if there is any significant tax advantage to do so.
Submitted: 2 years ago.
Category: Tax
Expert:  TaxRobin replied 2 years ago.
Hello and thank you for allowing me to assist you.
A company whose main activity is investments (such as buying and letting properties) pays corporation tax at the full rate. If the company makes a capital gain on selling a property of then there will be tax to pay. A company does not have an annual CGT exemption.
The lower rate of corporation tax does not apply to companies involved mainly in property investment and rental.
As a higher rate taxpayer, you pay 40% on your profit and gains. For a limited company, the tax rates are between 0% and 30%, this could be a savings for you.
If you do not plan on purchasing more and have no plans to sell in the near future, if you are more concerned about minimizing taxes on any ongoing rental income the company may be the best.
The company rate of tax would be much less than the higher rate of income tax you now have. Also if you leave the income in the company you would not pay tax on the funds.
I would strongly suggest that you sit with your personal adviser and apply all to your specific situation prior to spending any money to set up the Ltd.
Customer: replied 2 years ago.

Thanks, ***** ***** make approximately £7k profit after allowable expenses and therefore about £4k after tax. Any feel for what that could be if done through a company?

Expert:  TaxRobin replied 2 years ago.
If you leave the income in the company there not be tax to you. If you take the money out then it would be a dividend payment to you. 37.5% would be your tax on the dividend if you are a higher rate taxpayer.
The company rate is 20% for profits.
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