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Registering as an LLC business to reduce tax when buying a property

Journalist: Esther Shaw, Freelance

ended 24. February 2023

Should I register as an LLC business to reduce tax on the house I'm buying?

 

We’re seeing a surge in people registering as businesses to buy property to save on tax since new rules came into force. 

We want to look at why people are doing this / how you can do it / the criteria / the pros and cons / and what you need to know.

 

I also need to give a worked example to show how it will reduce the amount of tax someone pays – ie.  a comparison of how much you pay normally / versus as an LLC

Thanks so much


Esther

1 responses from the Newspage community

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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Whilst there is certainly a tax advantage to owning property in a Limited Company structure for some people, there are other reasons that it can be useful too. One of the main ones at the moment is lenders' Interest Coverage Ratio (ICR) calculations; for a higher-rate taxpayer many lenders require the rent to be 140% or even 145% over a stressed mortgage payment figure, whereas for a basic rate payer or Limited Company generally only need 125% coverage. This means that it's possible to generate a larger mortgage amount for a given rent level with a Limited Company for a higher-rate taxpayer.