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goatz

firt BTL- should I incorporate?

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goatz   

Hi guys,

I have an offer accepted on a second property to my main residence that I intend to make a rental. I intend to leave this with an agent to manage long term, and I dont intend on taking out any profit, I will just let the rental pay off the repayment mortgage (75% LTV).

The property is a £185000 2 bed flat with share of freehold.

I work full time and earn £60k basic, no other sources of income.

I cant quite work out if it would be beneficial to incorporate. Any advice would be much appreciated.

Mortgage rates I have been quoted for a 5 year fixed are Ltd 3.65% or personal 2.79%. The rental yield for the property ~5% (£850pm), and accountancy fees look to be £800 per annum for a ltd btl company.

Do my numbers look right?

personal    

rent    £10200
20% mortgage relief £662.03 (post 2020)
income tax £4080
tax after relief £3417.97
mortgage repayment     £3310.15
profit £3471.88

Incorporated

rent    £10200
mortgage repayment    £4556.65
gross profit £5643.35
corporation tax    £1128.67
accountant fees    £800
profit £3714.68

Doesnt really look worth incorporating for an increase of £242.8, unless I am missing something.


Thanks!

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Locke   

Why did you decide to do this?

If When prices collapse and they come after you for their money, the incorporation could protect you from handing over your main residence to the bank. Why not pay the full whack of rent into the mortgage and avoid all the corporation tax entirely?

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38 minutes ago, Locke said:

Why did you decide to do this?

If When prices collapse and they come after you for their money, the incorporation could protect you from handing over your main residence to the bank. Why not pay the full whack of rent into the mortgage and avoid all the corporation tax entirely?

Paying down capital won't decrease taxable profits in any way.

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