Holiday home purchase

[Ilikegherkins]

Hoping someone can advise
We are in the process of buying a second home. We plan to retire to this house in a few years but want to rent it out as a holiday cottage until we retire.

Is it best to use savings for this or buy it through my husbands limited company

Does anyone have experience in this area?

Would it make any difference re tax efficiency etc.

It is likely to be costly if you buy it through a limited company assuming it is located in the UK.

When you eventually move to it, you will have an annual income tax charge based on the HMRC Official Rate of Interest multiplied by the cost to the company of acquiring it. The calculation is a bit tortuous, depending on factors such as how soon the property is occupied by you. For a half million pound property the annual tax charge might be around £2,500 to £5,000 depending on your income tax rate in retirement. You also have an ATED charge of £4,400 if the property is worth more than half a million and it increases as the value of the property increases.

It might be the right way to buy the property when other factors are taking into account. If you use up your savings, do you then need to draw an income out of the company? If so you will pay tax but in a different way.

You need to speak to an accountant who can look at your wider financial situation, crunch some numbers and then advise.

Thankyou so much for taking the time to reply. It definitely needs more thought - as you say we probably need to have a chat with the accountant

Thanks again