As a property investor, you may have heard about the option to purchase properties with a limited company. While buying property through a limited company may not be the best fit for everyone, it can offer significant advantages in certain situations. In this article, you’ll explore the benefits of buying properties with Ltd. companies and whether it may be the right strategy for you.
Tax Efficiency
One of the greatest advantages of purchasing a property with a limited company is the potential tax savings. By holding the property within a company structure, you can take advantage of various tax deductions and allowances that would not be available to you if you were purchasing as an individual.
For example, the mortgage interest payments on a buy-to-let property can be offset against the company’s taxable profits, reducing the corporation tax you pay. Additionally, if you decide to sell the property in the future, the company would be liable for corporation tax on capital gains, which is often a lower rate than personal capital gains tax.
Limited Liability Protection
Another benefit of buying properties with a limited company is its limited liability protection. If a limited company owns the property and something goes wrong, such as a tenant filing a lawsuit against you, your personal assets are protected. However, the company’s liability is limited to the value of its assets, so your finances are not at risk.
Easier Access to Finance
Another advantage of purchasing properties with a limited company is that it may be easier to obtain financing. For example, lenders may be more willing to lend to a limited company than individuals, as the company can be seen as a more stable and secure borrower. Additionally, if you have multiple properties within the company structure, lenders may be willing to offer more favourable terms and interest rates.
Commercial Trust professionals say, “They can aid you to secure the best mortgages exactly for your demands.”
Estate Planning
If you want to pass your property assets on to your heirs, purchasing properties with a limited company can offer advantages in estate planning. Holding the properties within a company gives you more control over how the assets are distributed. You can transfer shares in the company to your heirs, which can be a more tax-efficient way to pass on your wealth.
Things to Consider Before Purchasing Properties with a Limited Company
While there are many advantages to purchasing properties with a limited company, there may be better fits for some. Here are some things to consider before deciding whether to buy properties with a limited company:
Set-up and ongoing costs: Running a limited company involves additional costs, including incorporation fees and annual accounts preparation. Make sure to factor in these costs before making a decision.
Financing costs: Financing a property within a limited company may come with higher costs, such as higher interest rates and arrangement fees.
Exit strategy: If you plan to sell the property in the future, it may be easier to sell a property within a company structure than an individual ownership structure.
Personal circumstances: If you plan to use the rental income from the property to supplement your income, owning the property within a company structure may not be the best fit.
Ultimately, deciding whether to purchase a property with a limited company depends on your circumstances and goals as a property investor. If you need clarification on whether it’s the right option, it’s always a good idea to seek professional advice from an accountant or financial advisor.
