Are you considering investing in a buy-to-let property via a limited company? Investing in property can be a great way to generate income and build wealth over the long term and by investing through a limited company, you can potentially benefit from tax advantages and other legal protections.
In this guide, Belvoir provides an overview of the pros and cons of investing in a buy-to-let property via a limited company. We’ll provide you with information that can help you make an informed decision about investing in property through the use of a limited company.
Pros of buy-to-let through a limited company
Some of the advantages of using the limited company method for investing in buy-to-let property include:
1. Lower Tax Rates: With a limited company, investors can benefit from lower tax rates than if they purchased the property in their own name. This is because limited companies are taxed at lower rates than individuals.
2. Limited Liability: As a limited company, investors are not personally liable for any debts incurred in the course of running the business. This can provide peace of mind when investing in a buy-to-let property.
3. Access to Capital: Limited companies have access to more capital than individuals. This can help finance the purchase of a buy-to-let property and cover the associated costs.
4. Legal Separation: With a limited company, investors’ personal finances are legally separated from their business. This can provide protection should the business incur any losses.
5. Increased Credibility: By setting up a limited company, investors can project a professional image and gain credibility in the eyes of tenants, lenders and other businesses.
6. Flexibility: Limited companies offer more flexibility than sole traders, allowing investors to set up multiple companies and manage them as part of a larger portfolio.
Cons of using a limited company to purchase a buy-to-let property
Along with the pros, there are also other considerations to make when you’re thinking about setting up a limited company to purchase property, including:
1. Different costs: The costs of running a limited company can be more expensive than running a buy-to-let property personally, due to the need to pay for accountants, solicitors, and other professionals.
2. Setting up the Ltd Company: The time taken to set up a limited company may be too long for some investors who are looking to invest quickly.
3. Not always suitable: The limited company structure may not be suitable for all investors, as it could be more beneficial to invest personally due to tax advantages and personal wealth protection. The limited company structure may not be appropriate for all investors, depending on the size and complexity of their portfolio.
4. Complexities: The process of transferring a buy-to-let property into a limited company can be complex and costly, and may require specialist legal advice.
5. Borrowing From The Bank: The limited company structure may limit the options for raising finance for the buy-to-let property, as banks may be unwilling to lend to a limited company.
Summary
In conclusion, investing in a buy-to-let property via a limited company can be a great way to diversify your investment portfolio and gain access to long-term tax-beneficial returns.
You will need to weigh up the pros and cons of using a limited company and decide if it is the right choice for you, as there will be associated costs, paperwork, and responsibilities. It is also important to be aware of the implications of being a company director in the UK.
Ultimately, it is important to do your research and make sure you understand what is involved in investing in property through a limited company before making any decisions.
If you’re thinking about expanding your property portfolio using this method – speak to Belvoir today – we have a variety of properties for sale in Nottingham and Nottinghamshire that are ideal for buy-to-let ventures.
