The first thing to consider is, how do you invest in property. If you buy, improve, sell you are likely to either have a company already that you work from, or if you don’t, you definitely should consider buying properties through a company whether you are investing for cashflow or capital appreciation.
Is a company the right set up for me?
Honestly, our opinion is that you have worked hard to make your investments, and you are entitled to maximise your income from these. However, there are pros and cons, like anything and you need to decide what is right for you as everyone’s scenario will be unique.
Things to consider before setting up a SPV Company?
It is worth noting, as much as the investors will soon be paying tax on their rental income without a company, corporation tax for businesses is dropping from 20% to 19% from April 2017 and 18% by 2020.
In the longer term, it is also important to consider how profits in a SPV will be used. If ‘dividends’ are taken from a SPV, the tax on dividends is going to rise also in the coming years. However this is after paying yourself more than £5000 per year. How you extract your money as Director is important, as with any businesses, but landlords looking for long term investments still get benefits in a SPV.
Mortgages are normally more straightforward when buying through a company. The downside is that the rates are normally more expensive and the number of products are limited compared to buying as an individual.
We feel that over the next few years as this market becomes more popular and competitive we will see the the amount of product available increase and rates becoming more attractive.
Costs & Time Involved
One other factor to consider, is the additional workload that comes with having a SPV. For example, businesses need to complete annual returns, which would lead to costs of having an accountant. Albeit it is possible to do this yourself if you are willing to invest the time to learn.
You do need to consider all of the above, change is coming. We do always stress that every person’s situations are different and you must look at all your income before making any decisions.
If you need help setting up a SPV, help is at hand with Intuitive Heights. Contact us to find out more.