DON’T purchase another investment property until you’ve read this! 

As you perhaps know, if you buy a rental property on your own name you will now have to endure :

  • Income tax on profits at your marginal rate
  • 40% Inheritance Tax
  • Up to 28% capital gains tax when you sell, payable within 30 days
  • The inability to cancel financial costs against rental income from residential property
But … with our partners you could potentially cancel costs as an expense against rental income, ascribe some or all future growth in the value of  investments for the benefit of future generations, consequently avoiding inheritance tax at 40%, pay only 19% corporation tax on profits, not need to pay personal income tax and of course expand your property portfolio to the max.

Don’t settle for a usual property company

If your plan is to acquire further investment properties within a LTD Company structure, please do not settle for an “ordinary shares” structure.

The existence of a single class of ordinary A shares is often a clear sign of there having been no thought given to tax planning whatsoever. If you have purchased your company ‘off-the-peg’ and then did nothing to change the share structure or the rules of the company (Memorandum and Articles of Association) then you are probably missing one or more very profit-making tax planning opportunities.

Surveys of buy-to-let mortgage brokers and lenders over the last few years have revealed that up to 85% of all new buy-to-let mortgages applications are from Limited Companies.  The tax team has reported that more than 99% of these companies have made no modifications to their ordinary A share structures whatsoever.

Normally, shareholders in a company own just one type of shares, these are called ‘ordinary’ shares.

They have:

  • Voting rights
  • Dividend rights
  • All capital appreciation attributed

Though, it’s feasible to create more than one class of shares so that varied levels of dividends can be declared to each class of shares. From a tax-planning viewpoint, this can be very useful for a family business where the shareholders have different levels of income from other sources. Additionally, it is possible to create a class of shares that have a nominal initial value, because they have no voting rights, no capital value and no automatic rights to receive dividends. This class of shares is perfect for inheritance tax planning because future growth in the value of the business can be attributed to them, and they can be gifted without tax implications whilst their value is insignificant.

Check My Mortgages tax team have put a label on this form of tax planning – “Extraordinary Property Company structuring”.

Even if you do already have an ‘normal’ single class of shares structure. It can be changed, Expert Mortgages to the rescue !!!

Get in touch now.