Updating post from Reddit.
I have been looking into moving a property into a limited company. When i first looked into this, lots of blogs and websites seemed to have ideas on how i could do it avoiding paying capital gains tax, stamp duty or both.
I now no longer think this is possible, and unless it's already in a partnership or i have a large business, i will have to pay stamp duty and capital gains tax. In my case for example i only own one property.
Does this sound right or am i missing something?
Edit: this is an example post that talks about not paying cgt through a gift and repurchase scheme - it doesn't really work right?
CGT and Stamp Duty will of course be payable, you’d have to work out whether it’s worth it. Single property? Probably not.
I think it will be worth it for me, as I would like to buy a more expensive house, and the 5% difference in additional property vs. Only property is more than the stamp duty + capital gains tax
If the property you are buying is replacing your main residence, you will not have to cover the 3% surcharge, this is true even if you own additional properties, like a second home or rental property.
The surcharge applies only to additional properties outside your main residence.
See source here - https://bartonwyatt.co.uk/what-you-need-to-know-about-the-3-stamp-duty-surcharge-on-second-homes/#:~:text=What%20is%20the%203%25%20surcharge,you%20plan%20to%20live%20in.
Oh wow, that's super interesting, thank you so much for this! I'm living in my partners (not married) flat at the moment. If I buy a property, and we move there, would it be replacing my main residence? And therefore I wouldn't pay the extra stamp duty even though I own a rental property?
Does your partner own the property? Can you get your name on it and you both buy the new property.
E.g if you own and live in property A, own a btl and B and then sell A to buy C which will be your primary residence then you would be replacing your primary resident. As far as I know if you don't own A and bought C you wouldn't be replacing your primary residence, nor if you were renting A.
Ah okay, that makes sense, thanks! My partner and I both want to keep our properties and theirs is more expensive than my buy to let, so I think I'd be better off with the original plan of just selling my buy to let to a ltd. company. Right?
I sold some properties to a BTL in 2017 and I’m currently doing it with my old home so I’ve read a few of theses articles but none of the suggestions ever seem practical at my scale. I’ve looked for posts from people who have successfully utalised one of these suggestions but don’t recall ever seeing one. I’d be happy to be proven wrong but I just don’t think theses suggestions are practical or cost effective.
Instead I have built my BTL SPV LTD strategy about being 0% Corp tax, income tax, ROI and Net Yield through claiming valid expenses on all rental income.
Instead I look at how long it will take to break even when selling the property. That is the amount it costs to sell divided by the income tax i will save. In 20017 this was 4 years, today it’s about 6 years. Very blunt but I find it useful.
Then I think about the other benefits of having the LTD. When I sold my property to the LTD I released enough equity to pay off my personal mortgage which saved literally £100k’s in mortgage interest. In the LTD BTL mortgage interest is 100% claimable, this is my biggest expense, my next biggest expense is Director Pension payments. These currently go to my wife who is a director. Director pensions are not linked to salary so you can make the full £60k payment even though my wife is unemployed, there is not pension tax relief though,
All other expenses are related to property management and are relatively smalll but I do get to claim a small percentage of household costs each year on a flat rate which is nice.
I think most of us have to suck up the sale costs and focus on long term benefits
Thanks so much for your answer, the pension payment is brilliant!