Property Investing is a hot topic at present; with the HMRC squeezing private landlords’ profits and tax deductibility, investors are looking for alternatives in the way they run their property portfolios.
Investors, however, who have smaller portfolios are struggling to find expertise from the smaller accountancy firms. The larger investor often has the funds to pay the larger firms of accountants with property specialists; this is not an option for the smaller investor.
I wanted to assist investors in this position, so have developed the skills and knowledge to do just this. I directly provide advice to existing and potential property businesses nationally. As a small business myself, my fees are extremely competitive, but it is the additional knowledge that clients want and need
Here are some frequently asked questions that will help you get an understanding of how I can help you.
So, what is it that clients usually need advice on?
Today, the question is whether they should invest property in personal names or consider using a corporate structure, which is usually a Limited company.
The acronym SPV is often used when purchasing a property, but what is this, and why is it used?
SPV stands for Special Purpose Vehicle and is simply a limited company whose only purpose is to own property; it's that simple. This company is no different in legality to any other Limited company; it is just used specifically for a particular investment, in this case, property.
So, when considering owning property personally or through a company, what are the usual considerations?
Of course, it very much depends on the personal circumstances of the investor(s) and their long-term objectives, but I usually would need to understand the following:
- What is the current situation with other property ownership?
- What is the long-term objective, how many properties do they see themselves investing in?
- What is the current income of the investor?
- Do they want income now from their investment or require future income?
- Will they want to sell any or pass on?
- Are they concerned with Inheritance Tax (IHT) on their growing estate value?
I consider all these when advising a client of their options, but many want to know the pros and cons of the two main ways to own property; these are:
Owning personally
- Higher tax rates than corporate ownership
- Mortgage interest no longer allowable as an expense, only a potential tax relief that is easily restricted.
- Remains in the estate for IHT purposes
- Normally lower interest rates on mortgages
- Lower deposits
Owning as an Ltd Company
- Only one tax rate, currently lower than income tax rates
- Interest expenses 100% deductible
- Shelters assets from estate for IHT – (needs planning not immediate)
- Deposits and interest rates normally higher
- Can distribute profits tax effectively.
- Provide an extremely tax-efficient income stream in retirement
With any advice, the current tax law affects advice; I can only, of course, advise on current law, and with a budget in early March 2021, any of the above could change and evolve.
As you can see, getting specific advice from a Property specialist can save you time and money, so get in touch for further information specific to your needs.
You can call 01623 490 120 or email
The author of this article is Haidee Watson, Director at Adcock Accounting. If you would like to find out more about Haidee you can connect with her on LinkedIn.