Buying a House (Options)

**MarillionFan** · 28 February 2011, 23:05

Originally posted by Sockpuppet View Post

Hi all,

Looking at investing in Chateau Sockpuppet. Due to being a contractor for the last few years I have a lot of money in the bank but in the companies bank.

What options are available to me without losing a tulip load in tax. Two options I've thought were....

a) Lend myself the money from the business. Pay interest at 5% (effective 1% due to CT) so hopefully there should be no BIK on this. Get personal mortgage for the rest.

b) Buy house through company. Rent back to myself. eventually either keep the house and rent to others or get a personal mortgage in the future and buy hoe from company.

Are either of these legal. Mainly as I don't want to lose 20% in tax on the cash I take out.

Got to pay some tax at some point SP.

It is always best to buy a property personally. That includes commercial, where the normal premise is to buy personally and then rent back to a LTD.

I don't think b) is a worthwhile option. So the main plan would be on how to get the best usage out of a)

Are you going to have to borrow funds or will you buy outright?

Is this your first property? Hence take advantage of 1st buyer deals.

Is this an investment property or second house?

You need to also have a think about whether going forward you are doing this the best way. Once you have a house you can rent your LTD an office space back, storage for example!

**d000hg** · 1 March 2011, 00:10

Quick thoughts:

- Do you need it now or can you take max dividends this tax year and again the start of next tax year to have a fair wodge of money for a deposit? Or even wait a year and have even more cash?

- Is it cheaper to pay the 20% tax and buy the property for cash (or much smaller mortgage) or get a more normal mortgage which you then pay off by taking as much from the business each year as possible under the higher-tax threshold?

**Sockpuppet** · 1 March 2011, 00:38

Thanks for the replies guys, seems like I'll be doing a few more months at client co to pay the 20% tax bill. Still should still be mortgage free by 30......wheres the banana.

**Alan @ BroomeAffinity** · 1 March 2011, 10:31

Or option c.) take out a deed of trust so that the company's funds are effectively held by you in trust and use those funds to offset against a mortgage. Providing the paperwork is right there is no problem in doing this.

There's a thread on this very subject somewhere.

**Olly** · 1 March 2011, 11:08

Originally posted by Just1morethen View Post

Providing the paperwork is right there is no problem in doing this.

That's great news that you now have unequivocal evidence from HMRC accepting this as valid with no tax or legal implications. Truly excellent news

**Danielsjdaccountancy** · 1 March 2011, 11:43

Why not speak to a Broker that is willing to lend purely on your day rate? That way not needing to touch the funds. Unless obviously you're looking for a big deposit.

**monkeyrhythm** · 1 March 2011, 11:48

Originally posted by Danielsjdaccountancy View Post

Why not speak to a Broker that is willing to lend purely on your day rate? That way not needing to touch the funds. Unless obviously you're looking for a big deposit.

Has anyone done this with a husband and wife 50/50 split Ltd company? Does the lender look at it any differently or will they do the same calculations on your day rate?

**Danielsjdaccountancy** · 1 March 2011, 12:04

The company we recommend will lend purely on the day rate.

If you'd like their details please feel free to PM me and I'll pass on their details, I would put my email address but have been caught out for spamming before

**Olly** · 1 March 2011, 13:30

I called First Direct on saturday as they do competitive offset mortgages. They work it out as the average of 3 years profits + salary which whilst not as much as doing it on your day rate should still be plenty for most and doesn't require any faffing with min contract length or whatever.

They'd handle the 50/50 share split I'm sure

Buying a House (Options)