Reply to: House Buying Sanity Check

[Martin@AS Financial]

Mortgage lenders tend not to like a deposit being taken as any form of a loan including a directors loan. As part of anti money laundering criteria, you may need to evidence your source of deposit showing the build up of funds over say 3 months.

Your accountant will be best placed to advise but when I evidence my clients source of funds (based on them trading through their ltd co rather than an umbrella), I tend to do so via the ltd co bank accounts. That way, if the purchase falls through, you will not have taken out dividends unnecessarily.

[mgrover]

I think there's a few issues with your plan, some around financial efficiency, i.e. if it's a private residency intended for yourself at some point it will be cheaper and easier to financing in your name - servicing the debt will be cheaper, there are a broader selection of mortgage products, selling your primary residence wouldn't incur tax if moving.

Not adding any asset appreciation when selling back to yourself is very likely fraud. Why not sell it back to yourself at a loss, then offset this against future gains...

I mean paying 60k in tax doesn't sound easier haha

But realistically as I'll repeat again, it's purely more so I can afford the property now without stretching myself to breaking out.

On the appreciation, I mean given the current market I can only assume the property would depreciate?

That's what I meant by my comment, I basically mean I'll treat it as I should when selling back to myself.

Anyways this particular strategy won't work due to my SIC code.

[eek]

Not adding any asset appreciation when selling back to yourself is very likely fraud. Why not sell it back to yourself at a loss, then offset this against future gains...

+1 you would need to pay stamp duty when the company sold it to you at the current market value which means any profit will be identified and expected.

The only sane option for the OP is if you plan to live in the property to buy it personally.

[TheGreenBastard]

Finally, when I sell the house back to myself, I don't plan on making any profit? ie it'll just be the same price. so it should balance out fine that way. Or a bit more given the mortgage payments but nothing crazy.

I think there's a few issues with your plan, some around financial efficiency, i.e. if it's a private residency intended for yourself at some point it will be cheaper and easier to financing in your name - servicing the debt will be cheaper, there are a broader selection of mortgage products, selling your primary residence wouldn't incur tax if moving.

Not adding any asset appreciation when selling back to yourself is very likely fraud. Why not sell it back to yourself at a loss, then offset this against future gains...

[mgrover]

No. Every piece of advice given by accounts on here is to do it personally. You'll have to pay tax on the profits when you sell and all sorts so no benefit buying it though company.

That may be an issue depending on the "value" of the house when its ownership is transferred...

realistically even in this market how much is it reall going to appreciate? 10-20% max?

[Zigenare]

Finally, when I sell the house back to myself, I don't plan on making any profit? ie it'll just be the same price. so it should balance out fine that way. Or a bit more given the mortgage payments but nothing crazy.

That may be an issue depending on the "value" of the house when its ownership is transferred...

[mgrover]

Phillips Law <-- Linky

A significant benefit is the tax treatment of profits. For private landlords, profits from rental income are taxed via income alongside your other earnings. However, if you choose to buy property through a limited company, the profit you make will be liable to corporation tax instead. Corporation tax is currently 19%

No. Every piece of advice given by accounts on here is to do it personally. You'll have to pay tax on the profits when you sell and all sorts so no benefit buying it though company.

So am not planning on really doing anything with it when the company owns it(outside of paying mortgage/bills)

It's purely so I can sit on it while building up my war chest to eventually take the silly tax hit.

It's more about not losing the opportunity to buy this place AND overstretching myself in the process of doing so.

Finally, when I sell the house back to myself, I don't plan on making any profit? ie it'll just be the same price. so it should balance out fine that way. Or a bit more given the mortgage payments but nothing crazy.

I also don't plan on using any company funds to rennovate the place. This is purely to sit on the property till I am in a stronger financial position.

I also don't plan to move into the place. Just effectively keep it on the books.

if it wasn't for the dividends tax/stamp duty this wouldn't have been a big issue.

Btw I've been speaking to a mortgage advisor on the above(and in general) and in the spirit of documenting it he said,

There is a lot fewer lenders out there that will lend to limited companies and most require the limited company to have 3 years trading history and to have the following.

The company should have one of the following SIC codes (Standard Industrial Classification) set up at incorporation:
• 68100 - Buying and selling of own real estate
• 68209 - Other letting and operating of own or leased real estate
• 68320 - Management of real estate on a fee or contract basis

I for one, don't have 3 years under my belt and am not operating one of those SIC codes.

I don't think that means nobody will lend to me but obviously why make another headache.

[vetran]

Cost of money has far more impact on house prices than supply. It doesn't really matter how few houses there are, if they aren't affordable then prices will fall until they become so.

We are short several million houses, but we don't have millions homeless. People simply houseshare more.

hardly

https://www.ons.gov.uk/economy/infla...ices/march2023

• Annual private rental prices increased by 4.6% in England, 4.4% in Wales and 5.1% in Scotland in the 12 months to March 2023.
• Within England, the East Midlands saw the highest annual percentage change in private rental prices in the 12 months to March 2023 (5.1%), while the South East saw the lowest (4.2%).
• London's annual percentage change in private rental prices was 4.8% in the 12 months to March 2023, above the England average and its highest annual rate since December 2012.

https://www.thisismoney.co.uk/money/...st-decade.html

119% rise in 10 years with stagnant wages.

If banks were only source then maybe but

https://www.mortgageadvicebureau.com...iggest-lender/

Not quite millions homeless but quite a few in emergency accommodation.

https://www.gov.uk/government/statis...-to-march-2023

[northernladuk]

How about i buy this via limited company.

Am not planning on living on it. So would be solely business use

It's just to sit on it while my finances improve and I avoid paying that 60k

No. Every piece of advice given by accounts on here is to do it personally. You'll have to pay tax on the profits when you sell and all sorts so no benefit buying it though company.

[Zigenare]

How about i buy this via limited company.

Am not planning on living on it. So would be solely business use

It's just to sit on it while my finances improve and I avoid paying that 60k

Phillips Law <-- Linky

A significant benefit is the tax treatment of profits. For private landlords, profits from rental income are taxed via income alongside your other earnings. However, if you choose to buy property through a limited company, the profit you make will be liable to corporation tax instead. Corporation tax is currently 19%

[mgrover]

How about i buy this via limited company.

Am not planning on living on it. So would be solely business use

It's just to sit on it while my finances improve and I avoid paying that 60k

[JustKeepSwimming]

there are fewer houses than people needing them the prices will recover.

Lots of nice flats with 66 year leases with 20-30k off currently wait till the bloodbath ends.

Cost of money has far more impact on house prices than supply. It doesn't really matter how few houses there are, if they aren't affordable then prices will fall until they become so.

We are short several million houses, but we don't have millions homeless. People simply houseshare more.

[vetran]

I don't think so. We are looking at 6% EOY and 7% EONY. Historically inflation comes in waves we are no where near even the beginning of the end.

"Fine" meaning in 10 years the house you bought is worth the same or more if you bought now.

beginning of the end will be when rates drop back to 5%~ where they will remain for many years until the next QE period.

there are fewer houses than people needing them the prices will recover.

Lots of nice flats with 66 year leases with 20-30k off currently wait till the bloodbath ends.

[JustKeepSwimming]

If he stays put for over 10 years he should be fine.

I don't think so. We are looking at 6% EOY and 7% EONY. Historically inflation comes in waves we are no where near even the beginning of the end.

"Fine" meaning in 10 years the house you bought is worth the same or more if you bought now.

beginning of the end will be when rates drop back to 5%~ where they will remain for many years until the next QE period.

[SueEllen]

You don't try and catch falling knives.

If he stays put for over 10 years he should be fine.