The property market is absolutely booming right now, with plenty of people excited about investing and making decent money. But are you struggling to decide the best way to hold your property investments? If so, this video blog will give you the basics to help with your decision.
You can hold properties in several different ways – personally, in a partnership, or through a limited company. Holding them personally is the easiest option. The income just goes on your self-assessment tax return, and what you own is yours. If investing jointly with someone like a business partner or spouse, this would typically be set up as a partnership with the money split evenly and taxed via your individual self-assessments.
Limited Company
The other option is holding properties through a limited company set up specifically for property investment. The properties are owned by the company, though you can have various shareholders like yourself, partners, or investors.
So what are the pros and cons of each structure?
Holding properties personally or in a partnership is much simpler, with fewer paperwork and reporting requirements than running a limited company. However, recent tax changes mean you now only get 20% tax relief on mortgage interest rather than full relief if you’re a higher-rate taxpayer earning over £50,000 per year.
As a limited company, you only pay 19% tax on profits. So if you’re a higher rate taxpayer, this is very attractive compared to paying 40%+ tax on rental income personally. The downside is that limited companies involve more admin work, reporting requirements, and legal obligations.
I also find mortgages and solicitor fees tend to be higher for limited company property purchases. And it really annoys me having to pay for the same “independent legal advice” on personal guarantees every single time, even though I already know what it means as an accountant!
consider your end goal
When structuring your portfolio, consider your end goal too. Are you aiming to buy just a couple of properties to live off the income? Or are you building a larger portfolio across multiple areas? A limited company may be overkill if it’s just a small investment.
The best approach is to make the right decision for your circumstances based on current legislation. But don’t beat yourself up if things change and you need to restructure later, as that’s out of your control. I’ve had properties in my own name, a partnership, and a limited company at different times based on the tax rules.
Investing in property can be a wonderful journey if you get the right advice. So, book a free discovery call via the link below if you need any guidance. No pushy sales pitch, I promise – just honest advice.
