Reply to: Buying a flat

[northernladuk]

I took it to heart by concuring with Dantes post that NorthernLadUK is an absolute prime example of a <mod edit>stirling chap</mod edit>.

<sniff> You made me cry

[Kanye]

Well It looks like he didnt take this post to heart.

I took it to heart by concuring with Dantes post that NorthernLadUK is an absolute prime example of a <mod snip>

[d000hg]

Your company could buy it specifically to let to contractors. Such as you - AND other contractors when you're not using it.

[escapeUK]

Is this post for real????

Buy your home with your money. End of..

Well It looks like he didnt take this post to heart.

Northernladuk - I've just started browsing the forum again after a while away and have seen numerous posts to which you have replied.

Do you know that you come across as a total bell-end in most of your posts? I'm just letting you know, as if it was me I'd want to know.

[Kanye]

Thanks for the comments so far.

I'm extremely bearish on property so don't expect capital gains to be an issue.

[Waldorf]

This may assist if you are contemplating property investments

http://www.nixonwilliams.com/images/...20Taxation.pdf

[Clare@InTouch]

Can I just revive this old thread?

I'm in the situation now where I'd like to buy a flat for 135k cash, to live in full time.

Most of money is in the limited, so I'm looking at a dividend for almost the full amount on April 7th.

Does anyone have any links that will help me decide whether I'm best to do this via the company or personally?

It seems to me that buying in the company might be more expensive and more hassle over the long term, but that may be preferable to withdrawing 95k cash at 40% tax.

If I go via the company, the elements I think I need to be aware of are:

1) Benefit in kind of around £9k per year to me in rent. How do I calculate how much tax would I pay on this annually? This hardly credible source suggests 20%, so around £1800 tax to pay per year. That doesn't sound so bad - it would take me over 15 years to pay back the amount I'm going to be paying on my self assessment bill.

1a) I believe there is an option to pay rent into the company, reducing BIK exposure, but I believe this rent would then be 20% taxed and 20% VAT'd, making this much the worse option.

2) How much would the purchase reduce my corporation tax by out after this purchase? It sounds like it would be immaterial from the discussion above.

3) If it's in the limited name, would things like council tax and maintenance become expensible to the company?


I don't plan on selling or closing the company for a long while.

Edit - I assume the recent 15% stamp duty thing is just for houses over 2 million?

The £95k dividend would be taxed at dividend rates, not income tax rates, so it would be less than 40% (mostly at 25% in fact, depending on other income). Say £25k for arguments sake.

Ignoring the BIK implications for a second, one of the main factors to consider is the fact that you'd have to pay CT on any gain if you sold it - you don't get the PPR (Principle Private Residence) exemption that you'd get if you owned it personally. If you keep it for 15 years and it increases in value by £100k - that's a CT bill of £20k. Plus you'd have paid BIK in the interim.

If you wanted to close the company at any time then you'd have to sell the flat back to yourself - crystallising any gain as well as incurring legal fees and stamp duty.

Have a look here to start the BIK calculation: Living accommodation: Section 107 ITEPA 2003: cost basis or market value basis

[ASB]

Can I just revive this old thread?

I'm in the situation now where I'd like to buy a flat for 135k cash, to live in full time.

Most of money is in the limited, so I'm looking at a dividend for almost the full amount on April 7th.

Does anyone have any links that will help me decide whether I'm best to do this via the company or personally?

It seems to me that buying in the company might be more expensive and more hassle over the long term, but that may be preferable to withdrawing 95k cash at 40% tax.

If I go via the company, the elements I think I need to be aware of are:

1) Benefit in kind of around £9k per year to me in rent. How do I calculate how much tax would I pay on this annually? This hardly credible source suggests 20%, so around £1800 tax to pay per year. That doesn't sound so bad - it would take me over 15 years to pay back the amount I'm going to be paying on my self assessment bill.

1a) I believe there is an option to pay rent into the company, reducing BIK exposure, but I believe this rent would then be 20% taxed and 20% VAT'd, making this much the worse option.

2) How much would the purchase reduce my corporation tax by out after this purchase? It sounds like it would be immaterial from the discussion above.

3) If it's in the limited name, would things like council tax and maintenance become expensible to the company?


I don't plan on selling or closing the company for a long while.

Edit - I assume the recent 15% stamp duty thing is just for houses over 2 million?

Owning via the company is generally not the right thing - though it can be in some circumstances. The taxcafe guide is pretty good.

An alternative you may not have considered - depending upon how much income you need to live might be to take a smallish mortgage and pay the extra dividends over a number of years to try and keep in basic tax band. You could also consider offsetting company funds against the mortgage. Search for some post on that subject by THEPUMA.

[northernladuk]

Of course it's for real.

I'm just looking for the most tax advantageous way of doing things.

From where I'm sitting, it looks like the choice is spending £30k in tax in January 2014 or £1800/yr BIK for the foreseeable. Sounds sensible on paper.

I suspect I am missing something, but if that's not worth a forum post to you then you have too much money my friend.

Indeed, just like everyone else that thought this and tried a post, not hard to find. And if you were serious you should be talking to an accountant not a set of randoms on a board. Tax efficient or not (as it seems) I do not want to be taxed on the profit of my house as it rises in the next 10 years.

I don't have too much money but I am willing to do some basic research and ask the correct people if I am dealing with my home.

http://forums.contractoruk.com/accou...ch-office.html

http://forums.contractoruk.com/accou...d-company.html

http://forums.contractoruk.com/accou...ur-ltd-co.html

http://forums.contractoruk.com/accou...d-company.html

and there is always google results such as...

http://www.ir35calc.co.uk/property_i...ntractors.aspx

[Kanye]

Is this post for real????

Buy your home with your money. End of..

Of course it's for real.

I'm just looking for the most tax advantageous way of doing things.

From where I'm sitting, it looks like the choice is spending £30k in tax in January 2014 or £1800/yr BIK for the foreseeable. Sounds sensible on paper.

I suspect I am missing something, but if that's not worth a forum post to you then you have too much money my friend.

[northernladuk]

Is this post for real????

Buy your home with your money. End of..

[Kanye]

Can I just revive this old thread?

I'm in the situation now where I'd like to buy a flat for 135k cash, to live in full time.

Most of money is in the limited, so I'm looking at a dividend for almost the full amount on April 7th.

Does anyone have any links that will help me decide whether I'm best to do this via the company or personally?

It seems to me that buying in the company might be more expensive and more hassle over the long term, but that may be preferable to withdrawing 95k cash at 40% tax.

If I go via the company, the elements I think I need to be aware of are:

1) Benefit in kind of around £9k per year to me in rent. How do I calculate how much tax would I pay on this annually? This hardly credible source suggests 20%, so around £1800 tax to pay per year. That doesn't sound so bad - it would take me over 15 years to pay back the amount I'm going to be paying on my self assessment bill.

1a) I believe there is an option to pay rent into the company, reducing BIK exposure, but I believe this rent would then be 20% taxed and 20% VAT'd, making this much the worse option.

2) How much would the purchase reduce my corporation tax by out after this purchase? It sounds like it would be immaterial from the discussion above.

3) If it's in the limited name, would things like council tax and maintenance become expensible to the company?


I don't plan on selling or closing the company for a long while.

Edit - I assume the recent 15% stamp duty thing is just for houses over 2 million?

[Clare@InTouch]

There are NO capital allowances on investment. More so, you do not get capital allowances on dwellings (residential property) at all.

The reason I said minimal rather than none was because we don't know the full circumstances or intentions of the poster. There are situations when capital allowances can be claimed, but they are rare and small - hence my wording 'minimal'.

Tax on furnished holiday lettings : Directgov - Money, tax and benefits

I belive I also mentioned that this is a topic for proper discussion with an accountant so that the full facts can be gathered as this subject naturally disgresses into other possibilities.

[rmmc]

Investment property generally insn't depreciated and capital allowances would be minimal.

There are NO capital allowances on investment. More so, you do not get capital allowances on dwellings (residential property) at all.

[Thaumaturgus]

SOunds like one for the accountant then. Was just wondering if any posters here had actually done this themselves..

Thanks for replies.