Why limited company might not be the right route for your client – Paragon

by:
  • 01/05/2018
  • 0
Why limited company might not be the right route for your client – Paragon
Paragon Mortgages has warned brokers to be aware that the limited company approach may not be appropriate for all their landlord clients.

 

Using a limited company vehicle has become increasingly common for landlords with the introduction of portfolio lending rules and, more pressingly, changes to the mortgage interest tax relief.

As a result limited company products have reached record numbers with this growth expected to continue.

However, speaking at the Buy to Let Market Forum in Cardiff, Paragon regional sales manager Andrew Rudkin (pictured) highlighted some of the reasons limited company vehicles may not be right.

He also emphasised that it was very important brokers ensured their clients obtained some sort of tax advice.

 

The key points Rudkin raised were:

 

Client’s end game

The first question is, what is their exit strategy, what are they looking to do with this property? Is it income, is it growth, is it a combination of both?
Brokers should be trying to drill down to exactly what their client wants to do with this particular property.

 

Longevity

Limited companies can last longer than any individual landlord and can be potentially used for reducing Inheritance Tax (IHT) liabilities.
Before the tax changes a lot of the limited company business was for succession planning – whereby owners have their children as shareholders and therefore can pass the assets through and reduce the IHT bill.

 

Short term

There is very little advantage to putting a property into a limited company if the landlord is going to sell it on it straight away.
Individuals will lose the Capital Gains Tax relief of £11,700 and the tax for selling within a limited company is currently at 19%. So it is again important to consider the individual taxation impacts.

 

Income

Do they need income or not? Taking monies out of the limited company can be costly.
Plenty of landlords will buy property in a personal name but they have to pay tax on the income generated. If it’s within the limited company they can leave it there, but when they take it out they do have to bear in mind the cost.

 

Extra costs for setting up

There will be finance costs and accountant costs. Clients will need an accountant, so they are going to have to assess this among their deciding factors too.

There are 0 Comment(s)

You may also be interested in

Bridging

Keep up-to-date with all the breaking bridging and short-term lending news and analysis, from regulatory changes to product innovation and inside market knowledge. Take a look at our broker and lender case studies showing short-term finance in practice.

Commercial

Find all the news, opinion and analysis for property finance brokers specialising in commercial and semi-commercial mortgages, alternative and development finance for commercial investments in residential projects.

Second charge

Stay up-to-date with the latest news, analysis and opinion on the secured loan market as it evolves into a mainstream finance option following European regulation on 21 March 2016.

Complex buy-to-let

Whether it’s a complicated asset or a complex customer, you’ll find out all the breaking buy-to-let news in this section. From limited companies to portfolio landlords, student lets to a House in Multiple Occupation, we’ve got all bases covered with our up-to-the-minute news, analysis and opinion.

Mortgage Solutions

Find all the breaking news, analysis and industry comment on Specialist Lending Solutions' sister site, Mortgage Solutions
Read previous post:
John Goodall, Landbay
Landbay reports record Q1 lending amid further growth plans

Specialist lender Landbay has reported record lending in the first quarter of 2018, amid plans to increase headcount at the...

Close