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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 8065
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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If i rent/lease my BTL to a company am I right in

Customer Question

Hello
JA: Hi. How can I help?
Customer: if i rent/lease my BTL to a company am I right in understanding that the income is taxed differently then if to a private tenant?
JA: Which tax year is this for?
Customer: this tax year and next
JA: Anything else you want the Accountant to know before I connect you?
Customer: just this for now. thanks
Submitted: 3 months ago.
Category: Tax
Expert:  Peter replied 3 months ago.

Hi. Are you going to be granting a new lease over your property? or simply taking on the company as a tenant under a tenancy agreement?

Customer: replied 3 months ago.
I will be a leaseholder of BTL. I'm just about to purchase a BTL. the current Mortgage repayment will be higher than the rental after TAX (40%). however, I've been told that if I lease/rent to a company I don't get tax the same as I would renting to an individual?
is this correct and what is the Tax on Leasing/renting a BTL to a company?
Customer: replied 3 months ago.
to directly answer your question I'm unsure yet, because I'm unsure what the Tax implications of each will be, but I think I would be leasing to the company if allowed to do so.
Expert:  Peter replied 3 months ago.

Thank you for your response.

Apologies if I am backtracking slightly but do you mean that you have the opportunity to choose whether to acquire the property personally (taxed at 20%/40%/45% on rental profits), or whether you acquire the property using a company wholly owned by you (taxed at 19% on rental profits)?

If you buy the property personally and enter into a tenancy agreement with a company without any premium being involved then the income would be taxed in the same way i.e. at 40% if you are a higher rate taxpayer. In this circumstance there would be no difference between renting to a company or an individual.

Kind regards, Peter

Customer: replied 3 months ago.
Thanks, ***** *****'s the Former. Property is acquired personally. what is a premium and how would this affect the company payment being taxed?
Expert:  Peter replied 3 months ago.

For tax purposes the definition a premium is not straightforward! However in simple terms a premium is an up-font payment due on the creation of an interest in property i.e. at the grant of a lease. It is different from monthly rent which will usually be due in addition.

In my experience premiums are not usually seen when you give tenants the right to live in a property under an assured shorthold tenancy agreement involving a residential property.

Is this a commercial or residential property?

Kind regards, Peter

Customer: replied 3 months ago.
Hi this is a residential property which we would be willing to rent/lease to a company.
At the risk of asking a potentially complicated question. what is the tax on the premium?
Expert:  Peter replied 3 months ago.

Hi again. No problem! I will provide a response on this but just later today. I hope this is ok?

Expert:  Peter replied 3 months ago.

Property income is taxable as income. Lease premiums are taxed depending on how long the lease is granted for: if less than for 50 years part of the premium is taxed as income and partly as a capital gain. There is a formula to work out how much is taxed as income and how much as capital and in broad terms the longer the lease the more of the premium is taxed as capital gain. Capital gains tax are charged at lower rates than income tax (i.e. better for you), however prospective tenants will be less willing to pay sums up front (i.e. worse for them).

Kind regards, Peter