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Many investors are now turning to Limited Companies to hold their BTL property portfolios, some of the reasons for them doing this are as follows:
Higher tax relief from 2017-2020. The amount of Buy to Let tax relief individual landlords can claim back will be cut from a maximum of 45% to 20% for top rate taxpayers. This will not affect Limited companies therefore if you are a higher rate taxpayer, the tax that is payable via your Limited Company will be lower than tax on individual income.
No tax is due on dividends up to £5,000 for individuals. From April 2016, the Dividend Tax credit has been replaced by a new tax-free Dividend allowance of £5,000. This means that you will potentially receive a tax-free dividend from your BTL investment property or portfolio.
No income tax is payable when reinvesting profits to secure further properties, this means that you can grow your BTL portfolio quicker using a Limited Company than you can as a sole trader as there is no income tax payable on the retained profit within the Limited Company, therefore allowing you more funds to re-invest. However, corporation tax is payable on the Limited Company trading profits. This is currently 20% in 2015/2016 then reducing to 18% by 2020. This is still lower than the higher income tax rate.
Personal funds can be drawn back out of the company. Money that you put into the Limited Company for example mortgage deposits, can be drawn back out of the company via a director's loan.
Whether you are looking to add a BTL property to your portfolio or remortgage your current BTL mortgage on to a new deal there are various options available for your limited company BTL portfolio mortgage. Many different lenders offer you both interest only or capital and interest repayment BTL mortgages. Should you require any assistance or guidance, please don't hesitate to call First Commercial Funding Limited on 01202 937880.