Should You Buy a Property in a Limited Company in 2024?
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- čas přidán 2. 07. 2024
- Is it best to buy a property in a limited company or your personal name? In this video, I walk you through the best strategy to determine whether it's better to own rental properties personally or through a limited company, taking into account various factors such as taxation, cash flow, and long-term investment strategies. This is not financial advice and you should always consult with financial and tax professionals who can provide the right insights to specific situations.
Ultimately, the decision to own rental properties personally or through a limited company depends on individual circumstances, including the size of the property portfolio, tax implications, cash flow considerations, long-term investment strategies, and risk management preferences.
Setting up a limited company takes only a few clicks and £12. Check out Osome Company Setup: bit.ly/osome-yt
Calculator: www.propcalc.co.uk/
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00:00 - Introduction
00:18 - Calculating Tax in Personal Name
03:51 - Calculating Tax in a Limited Company
06:09 - When is It Better to Buy in a Company?
09:12 - How Much Does It Cost to Set Up a Company?
09:26 - WARNING: It's Not That Simple...
11:45 - Why You'll Lose Money if You Buy in Your Personal Name
Bro, I just want you to know I really appreciate your videos. First CZcamsr I've seen actually going into the details, and being UK focused. Thank you for your work. Wishing you the best success.
Glad I could help! Appreciate you here, too!
Agreed, and well said!
Agreed, great video!
I love that the video jumps straight into numbers and examples. No long introduction or unnecessary filler. Perfect!
As a visual learner its amazing to see the calculations on paper ❤ can't thank you enough. Keep up being awesome
Happy to help!
I haven’t even finished the video yet and it’s already the best I’ve watched on this topic. Thanks for being so generous with your knowledge and breaking it down in the way that you do
The additional tax rate bracket is now £125k and not £150k. Also your personal allowance reduces by £1 for every £2 above £100k.
If you’re a higher earner, it makes sense to put the property into a Ltd company.
100%
Not necessarily.
It depends if you have any loan interest and also if you need to take the money out.
Ahmed, thank you for putting out this video. I've been searching for a clear breakdown on this subject and you summarised all the points I was looking for perfectly! You've earned another sub
I'm glad you like it! Thanks for the sub bro.
This is a brilliant video and exactly what I’ve been looking for. Thank you!
Glad you liked it!
Well articulated and straight to the points, an aspect of property investment i was looking to understand as a beginner - Nice one👏
Thank you very much !nobody makes this info so clearly ,you definitely deserve all the success 🙏
You are absolute incredible. I love your practical approach and numbers prespective
Never ever seen as good as this video on this topic bro, much appreciated ❤🙏
I’m glad :)
Crazy how informative this video is. You got a new subscriber! You explained it so well!
Thanks and welcome!
Hey, I just discovered your channel a few days ago and you're doing amazing job ! Keep on going, this is truly inspiring and valuable content.
Thank you! Will do!
Such a useful video! This subject has been on my mind for awhile and you helped me understand the pros and cons
Glad it was helpful!
Great video, love how clear it is and how you explain it without an agenda
Thanks bro!
Such an informative video Ahmed. I have 3 BTL in my personal name. I didn’t know that when pulling money out by remortgaging that you pay tax on it in a limited company. 🤯 I have just subscribed!
Fantastic video and recently subscribed. Me and my wife have gone with a limited. She's an accountant. And we can get tax breaks on a room being an office in the house and also meals and fuel on visits to viewings.
Great content Ahmed. I just came across your video last week when I was looking for SA related content and I must say, I learnt more on your video than I learnt from the paid course I attended. I am about to take up a property for SA by next week in Peterborough and I have signed up for your mentorship programme but I'm yet to get a response. Great job bro
Elite and World Class video!!!! Super clear and straight to the point!!
Watched a few videos on this subject.. this made it easy to understand
Interesting angle! I guess also worth mentioning that interest rates are a bit lower in the personal name and you can get money out of a ltd in form of a directors loan but general rule of thumb applies if you stay 20% go personal if you are 40% go ltd?
ahmed i watch a lot of property videos and your simple non rambling explanations are spot on. Just dont forget LTD also is better for things like deaths etc , short term pain long term gain
Wow, went through the details really well, thanks for making me understand better!!
No problem!
Loving the videos they’re very in depth and informative
Glad you like them!
Probably the best property tax explainer video I have ever seen!! Well done man!
Appreciate that! 🙏
Thank you Mr Khan for all videos … its educational
Glad you found them useful!
I found it interesting to learn about the potential downsides of buying property in a limited company. It's important to consider all factors and potential risks before making any big financial decisions. Thanks for sharing this informative video!
Well said!
Great video, you’re really good at what you do and teaching thank you
Glad you liked the video!
Great vid, cheers.
Excellent video. Thanks.
hi ahmed, love the simplicity and explanations. im curious to know if you have any advise on best methods of transferring properties from personal assets into a ltd company.
Solid content. Subscribed
Thanks bro!
such a clear explanation. Thanks.
This is such a great video in a very details. Appreciate your effort ❤
No problem! Thanks for watching bro
Also, in limited company the solicitor fees and interest rates is higher so that must also be taken into account.
Really interesting. Thank you
New to the channel, like what you are doing. Just a note that its better to have a LTD company in terms of inheritance tax. Otherwise you'd get slapped with 40% tax.
That is a benefit. I’ve mentioned this in the calculator
Great video, you havnt mentioned ditectors loan which is presumably the deposit.
Great content, thank you
Glad you enjoyed it
Great video Ahmed 👏🏼
Thank you 🙌
Amazing Video mate! Please do another comparison when someone sets up a property management company rather than a limited company
What do you mean by this sorry?
Subscribed! Great video! Where can I find the comparison calculator you was using
Here, linktr.ee/ahmedkhann
Well explained.
Thank you!
Depends if the limited company which owns the property is in the Cayman Islands though 🤷♂️
Great video! I heard recently some advice regarding buying SA properties in own name due to tax benefits. Since I have just got my mind around buying in a company, I am not that comfortable buying in my personal name. What is your view regarding buying BTL and SA properties in the same company?
Good tips.
Thanks mate!
Well explained Ahmed. Better than many tax advisors 😅👏👏
Glad you liked it
What about if you’re already in the 40% income tax bracket before you have any property? Can you do a worked example of this?
Great video!
From my understanding the benefit of buying as a limited company has more to do with long term IHT planning and not the year to year tax payments
Can you make a video on pdr, converting office space into residential
Hi Ahmed, do you mean even other than your principal residence BTL bought in your own name and when you sell in the future you do not have to pay tax for capital gain?
The capital gains tax difference (personal vs company) might be worth considering.
Correct
Depends on your income
However there is the fact you can withdraw money in the form of a directors loan if the investment was loaned to the company from your personal account. This will be more tax beneficial than the calculations you have shown. However, still a great video and great information
Yes but you can only do that until the loan is paid back in so I did not want to include that in the calculations as that is not viable in the long-term
Thank you 🙏🏾
No problem!
Thank you for an easy to follow guide. Your calculator webpage isnt secure though, so wont open in my browser, which is a shame. But a great video never the less.
Hmm I’ll work on that
Great informative video. I was wondering how the comparison would be if instead of paying a salary to the limited company owner (reducing profit to zero) instead they were paid through dividends?
But then you would have to pay corporation tax
Thanks for the great video! What should you do if your base salary is already within 40% tax?
Go limited.
Most likely Ltd will be better for you but speak to an accountant just to doublecheck based on your situation
where can we get the link for the calculator at th start of the video? great video btw
Here you go www.propcalc.co.uk/
You should open courses for people my brother.I will definitely be first in line.
Just made a confident decision on a house after watched your video
Keep it up brother .appreciate it
You can find my free courses here: bit.ly/Ahmed-Khan
But in the first example its better because accounting fees is so high only
Yes also u can buy with a sipp and then it's tax free cos its pension proof 😮🎉
I wonder what will calculation look like if you are already in 40% bracket and the interest rates are high as they currently are, then llc makes sense from property 1 I guess
I have in the last 12 months purchased 4 properties in my own name to add to the 4 I already owned. This was a decision I made to carefully just about stay within the 20% tax bracket (I have no other job income) many video I have watched have suggested that I made the wrong decision but after watching your video I am more confident that unless I buy anymore only then will I need a LTD company structure as I would be in the higher tax bracket. I also personally think that the government will change the rules again once there is enough people suck more money out of in LTD company structures. Thank you so much for this great video Ahmed😊
My thoughts too. I lose about £500 a year on my BTL in my personal name, but can't help think that the government will absolutely go after LTD company property wrappers next.
You made the correct decision in my opinion. If you have no income you're far better buying in your own name and using that as your income in the 20% tax bracket rather than all the hassle of tying up in a LTD company for probably no financial gain.
There are too many people giving one size fits all advice when it is never the case. Well done for sticking with your decision
You cannot raise the rents now 😅
The average rent of each property is £520/month after repairs? That is very cheap I assume they are north-north!?!
if I am an international property buyer and will be buying properties with full cash payments (no mortgages of any kind involved), should I buy them in my name or LLC you think? I am considering to buy multiple ones for rental purposes so they can supplement my annual expenses while living in the UK...thanks for the help.
Thanks for the great info.
Can you teach me the property business??
You can check out my free courses here, linktr.ee/ahmedkhann
Ahmed, would you still recommend serviced accommodation for a revenue stream?
Realistically how would you spend or access the money with in the limited company bank account
One of the other things you need to take into account is Directors Loans, how you can loan the company the money and pay it back once you've received enough rental, With no tax implications as all the investments into the property you can class as a directors loan.
Yes but that only works until you pay off the loan. I want to build a calculator which allows for the long-term
@@ThatAhmedKhan let’s say it’s a £40,000 property and it brings in £400 a month
That’s going to take a while to recoup that loan that you put in but I completely get it’s for calculator purposes
None the less great video 👌
In the example of taking equity out of the property, you had a £75K loan against a £100k property, after 10 years the property is worth £200k so you remortage at 75% LTV and get £150k of which £75k goes back to the original lender to settle that mortgage and £75k can be taken tax free - which is great. However, you're surely then servicing a mortgage that is double what it was and then likely putting yourself in a corner in terms of profitability/tax liability, with the initial example of HMRC seeing your profit as exclusive of any mortgage deduction other than that 20% relief? Maybe I've missed something here - hope I have to be honest?
So the £75k you pull out when you remortgage is still tax free and no CGT when you sell? Can taking out the £75k also help mitigate GCT later on?
Great to see someone talking about the UK market! Do you know if it's a difficult process to move the property from personal name to a limited company once you pass the income threshold? Also, how about capital gains tax? Is this more costly in personal name or limited company? Many thanks 😊
No it’s not difficult, speak to 118 property, they are experts in advice on this 😊
The cheapest monthly rate for an accountant I could find was £100 a month for my limited company 😭 so it would be even less profit
My God - you are such a genius - How does your mind work - Truly a Genius. What is your IQ MAN!? I am sure there is no calculator for that one! Your IQ must be a very large number and I bet you - you are a chess player can solve the Rubbicks Cube and you find Sudokus easy to solve. Wait a minute you are not a professor - Are you? Well you should be. Thanks for all this flawless education.
Appreciate your message! Thanks for watching!
In limited company you get more control and can decide when and if you want to take money out. When purchased a property under your name, you have not control.
Good video- what about the cost of a commercial loan vs BTL Mortgage? - also costs to move properties from personal to ltd company ownership?
Stamp duty
i dont that understand that 30k can you please explain
? where does come from?
Thanks Ahmed.
What if you have properties in joint accounts.... Then you can go upto 4 properties in joint names!!!! One of my friend had done this. And from 5th property they are buying in ltd company.
Hope this helps too
Yeah that can also work
Can you point in the direction of a place I get get limited yearly accounts done for £500 a year please. Much appreciated. Great video
Try these guys: bit.ly/osomenotion
Hi please correct me if Iam wrong that 75k made in personal name it’s still subjected to CGTno doubt of that which is btw 18-24%
Tax on dividends is is much lower than 20%. Potentially 8%. You can deduct a lot of costs before you calculate tax. You have double tax allowance.
But when you factor in 33.75% dividend tax for higher earners.. even in a Ltd company, you’re still paying over 50% tax…
My question is how can anyone make any money under these circumstances ?
The compnay have to pay NI on the salary you are receiving from it
Where does national insurance play into this?
Ahmed - if you take into account dividend allowance, it makes it even more favourable to invest through a Ltd company.
Yep correct :)
11:00 You would only pay that large sum of tax if you take it out, you can keep it in and buy other properties and not pay tax @Ahmed Khan
Exactly. Very important point he missed Its one of the biggest reasons why people invest through Ltd's
You earned yourself a subscriber, great content 🫡
Thanks bro!
Hey great video, one thing are you 100% sure that's how the 20% tax relief works on property held in your own name? My understanding was the 20% gets taken off the mortgage amount before tax. So on a 5k mortgage you would get 20% relief so you would pay tax on 4k. Not pay on 5k then claim 20% of the mortgage back. This would mean only £200 of your tax bill not £1000 meaning a ltd would still be more beneficial in your first example.
I've doubled checked this and I'm pretty sure what I've said is correct. I've looked at worked examples on the Gov website and they confirm this :)
@@ThatAhmedKhan Hi, it isn't quite correct. The 20% tax relief is only on the mortgage interest, not the repayment aswell. Also, taking money out of the business rather than taking it as a salary at 20%, you would want to take it as a dividend which will be 8.75% at the time of this message. Other than that, great video man. Keep it up
and that's talking about through a LTD company there in my comment above
@@JordaanW yes you’re correct about the mortgage interest. In the video I was talking about buy to let mortgages, which are 99% of the time interest only, so I didn’t quite clarify that and just assumed that everyone knew that but maybe should’ve pointed it out.
I’ve also changed the online calculator so it now is based on dividend :)
@@ThatAhmedKhan Nice one! Keep up the content buddy
Could you not pay yourself in dividends?
🥇
Great video
Really appreciate it
Is there any chance of getting an advice from you.
I would like to know if I want to move a BTL property from personal name to LTD company:
What would be the cost?
Most likely you will have to pay stamp duty
@@ThatAhmedKhan
Are there any more costs?
How hard is this.
Have you had to get an "Energy Performance Certificate" for any of your properties yet. Can you make a video if you have. Thanks
These are required for all rental properties, even now.
You will fail to issue a section 21 if these are not present.
A limited company can't deduct mortgage payments from rental income only interest is deductible. Also, the 20% relief only relates to interest, not the total mortgage payment.
This video and calculator is for BTL properties and pretty much all BTL properties are on interest only mortgages so the calculator should hold but yes fair points
Could you not just take the money out of the ltd company as dividends at 8.75% tax as a basic rate tax payer? Making this comfortably the best option for paying the least tax?
A divided has to be paid from profits. Therefore you’d have to first pay 19% corporation tax and then the 8.75% dividend tax, which would end up being more than the 20% income tax.
Also- ltd company mortgage interest rates are also higher?
Yes marginally.
Please help and suggest which lender provides company btl mortgage at same rate as personal btl. It will be very helpful to know such lender
Buy to let mortgages in a limited company are more expensive than your personal name
I am lucky 95 percent of my income is BTL and i have managed to stay as a 20% tax payer one day thresholds will rise sooner the better
Well if you owned your property in a limited company you would pay yourself by dividends. That is the advantage.
there is a bit in this video where you say that when one refinances a property owned in a LTD company and draws down on the surplus loan - then one is liable to pay tax on it.......as the loan is effectively treated as profit.........how sure are you about this?
The loan isn't treated as profit, it's just an increase in cash.
@@ThatAhmedKhan the funds (albeit loans) belong to the LTD company which is why one is taxed if the director / SH extracts them as div or salary- however there are ways around it if planned ahead….
surely this just depends on how much you plan to scale?
Yes. As he said, if you are buying more than 2 or 3 properties, you are better off buying in limited company.