Renting out a property.

[MarcoPoloCX]

I have a question about renting out a second property.
Assuming you are renting out a property that is mortgage free.
Would it be better to set up a LTD and have all income and expenses go via that, and you pay yrself dividends every now and then?
Or simply get paid straight to you and you do a self assessment at the year end?
I am in high tax bracket.

Also are any relief allowable under LTD and not under personal assessment?

If you have a mortgage on your other property you'd be better getting a buy to let mortgage for the property you intend to rent out and use the funds to pay down the other mortgage because mortgage interest is deductible when calculating you tax liability on the rental property.

There are pros and cons and it depends on what you are doing longer term.
But definitely agree with the interest point in the last post.

Sorry- I didn't make it clear how my last post related to the limited company point- if you do go down the route of a mortgage on the rental property you may struggle to get a mortgage through a limited company so you'd need to go down the personal route but you would have significantly reduced your tax liability.

Like chasingsquirrels said, there are other factors to consider when deciding to have a ltd company or personal rental property if there is no mortgage involved, eg you can use your personal allowance for the first part of any capital gain if you plan to sell but that isn't an option with a company.

Company gets indexation allowance, though, so the loss of annual exemption MAY NOT be a big deal. A bigger problem is that giving the house to the company will trigger a capital gain in your hands and if there is a gain there you may have to pay tax just to transfer the property. Income tax saving is also minimal since the company needs to pay 20% tax on rental profits and you pay an effective 25% on the dividend you take if you're a higher rate taxpayer. Plus, when you sell the property the company pays corporation tax on the gain and, to take the money out of the company, you would have to pay income tax or capital gains tax, depending on a method of cash withdrawal.

In general it is not advisable to put a rental property in a limited company unless you're looking at having a portfolio of them and run an ongoing business. And even then it's not always advisable.