Updating post from Reddit.
Could I sense check my thinking;
Plan is to buy a property for holiday let in my Ltd company. Ballpark figures of £250k property, £150k deposit, £100k mortgage.
I've been told that if I set up a new Ltd company and loan the money across it will mean that more lenders are available vs getting a mortgage in the existing company (which is a holding company above a trading company).
Mortgage advisor says that the difference in rate could be 0.5% more in the trading co. (maybe 6% v 5.5%)
I'm hesitant to set up a new Ltd company because the accounts and tax will be around £2k pa based on what we pay for the other Ltd company.
The 0.5% saving on £100k mortgage is only £500. Which will drop over time as we're planning on overpaying the mortgage each year.
Are there any other considerations to using a fresh Ltd company that I'm not seeing?
I assume you are aware that you can’t get a standard BTL mortgage for a holiday let, you would need a specialist lender and rates would be higher. Also the property could be considered commercial premises and charged to rates rather than council tax and in some areas you need planning permission to use a property as a holiday let.
Thanks - yes I've spoken to a specialist broker. I am expecting to be paying business rates rather than council tax. Will be confirming on the permissions, but it is in a block with other flats that are holiday let, so hopefully no issues there.
How are you paying £2k for accounts and tax? GetGround is a company that sets up lots of property structure for people and do accounting / tax, it’s effectively the premium cost option. It’s £48 a month, no one should be paying more than that. £576 a year.
If the mortgage saving is £500, then the £76 is for:
Easier accounts - it’s far easier to sort your current business and the SPV individually.
More places will lend to you - not just a better rate, but more options.
Asset protection - you ring fence the operations, anything goes wrong with the house? Business is fine, business tanks? House fine.
Selling the house - you can sell the company not the property, currently far less stamp duty that way. Meaning you can likely negotiate to get more cash when you sell.
Inheritance tax planning - much easier to sort when it’s split
Future scaling - are you getting more properties? It’s also more future proof in a world where they regulate landlords more and more.
Brilliant thanks that's some great points for me to think about.
I guess the £2k is for the more complex trading structure companies. Good to know that it could be much cheaper than that.
I was quoted 2.5k to set up an Ltd company and 1 years accounst this year. In east Midlands
Mortgage Lenders dislike trading companies, you always want a Special Purpose Vehicle (SPV) in that you own 100% and are the only director. Keep it simple.
Some lenders allow intercompany loans (TradingCo loans the SPV money), whilst others dont and require a director to give the money. All that realy means is that Trading Co loans you the funds, then you loan the SPV funds.
Your mortgage advisor is correct, set up a NewCo.
You likely also want to keep your AirBnB in one company, and your BTLs in anouther. Not all lenders like giving you a BTL Mortgage if you have a Holiday Let in the same company.
>Are there any other considerations to using a fresh Ltd company that I'm not seeing?
Accountants hate it, structured companies are prefered by them but whats best for taxes is not best for access to mortgages unfortunetly.