Forming limited company (buy to let business)

, In general terms it is not normally advisable to put a residential let into a limited company, due to the costs of extracting monies on sale. Although there are income tax benefits that you allude to, the charge to CGT is more severe. The main occasion when it is beneficial is when a property is owned in this manner while you are a higher rate tax payer, but you can distribute funds over time as a lower rate tax payer, ie on retirement. If you are going to go down this route it is imperative that you take good advice, as if you structure things badly it will be ineffective. As you currently state you are in the process of buying the second property, it is possibly already too late to consider this option - if sell to the company you will be hit with stamp duty again. A limited company is useful where people are renovating properties as this is an income tax not a capital gains tax activity. IN addition if you are carry out the actions of an agent, you can set up a ltd co to carry out these service’s but hold the properties in your name. This is only suitable if you have a large letting income. Regarding your other points, the renovation costs prior to letting are considered capital (despite what I have just written above - this is tax - don’t look for logic!) and will reduce your capital gain on sale. VAT can’t normally be reclaimed as you wont be VAT registered. Running your GF's car from the business will result in a large tax bill for her - and is not normally worthwhile. You can get relief for running your business from your home office, bills PC's etc, but only that portion which relates to it. Having 2 rental properties isn’t a huge undertaking, and therefore the office expenses connected to be reasonable are not going to be significant. For example if you use your PC 10% connected to the business, only 10% of the costs can be claimed. Putting your main residential property into the business is very unwise - you can claim a deduction on the mortgage interest for debt used to purchase the property financed on your home without throwing away your exemption from CGT and paying stamp duties again. I would suggest you do go on to take some proper advice given the size of the investment you are undertaking. If I can be of assistance, please let me know. Regards, James Smith Chartered Accountant www.uktaxshop.co.uk 01284 764436
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

I would think very carefully about forming a company. Currently I would expect you are running this as just property income and going through the self assessment mill. If you set up a company you will have to consider all the administration aspects. If you are only going to make less than £10K it would hardly be worth it. For VAT purposes you are going to have to turnover 57K that means income only per year. That equates to just under £5000 per month. The more involved you get in the business the more it will cost you to run it. Things like company cars sound nice but you need (expensive) advice to ensure that you don't get it wrong. Good Luck Doug
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D Cooper