“We often get asked by clients whether or not they should buy their rental property via a limited company instead of in their own personal name," another property consultant said. - AFP pic for illustration onlyAt the recent Shareda’s PropEx 2023 property talk, the audience was told of the “Compelling Reasons for Investing in UK Property” presented by Chris Tan and Yudhi Mapara of SiiX Real Estate Pty Ltd of Melbourne, Australia.
“As a Director of a Limited Company, you can have trivial benefits of up to £300 per year tax-free from your Limited Company. This is not possible for landlords who own their rental property personally. “It is important to realise that it was the intention of the government for higher rate taxpayers to contribute more in tax than their basic rate taxpayer counterparts when they brought in the Section 24 interest restrictions.
The mortgage interest expense is therefore allowed in full for Limited Companies when calculating the profits on which Corporation Tax will be payable on. The first £12,570 is covered by the owner’s tax-free personal allowance and the remainder of this gross income will be taxed at the rates based on the below table:Basic Rate £12,501 to £50,000 20%Additional Rate over £150,000 45%
However, as a rule of thumb, the mortgage rate you obtain in a Limited Company could be higher than the equivalent mortgage you would obtain on the same property in your personal name.Even after paying this additional interest, it is still usually more tax efficient to purchase the property via a Limited Company for a higher rate and additional rate taxpayers although this will depend on the mortgage rates being offered.
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