Rental income on land - use to pay mortgage?

[bakingmummy21]

Wondering if anyone can give a view on this. We bought a house a few years ago which came with some land. Single purchase price and mortgage. We have since rented out some of the land and set up a limited company for the income and any outgoings related to the upkeep of the land. It’s classed as a micro business and we filed accounts and paid tax etc.
Due to circumstances I am wondering if the rental income / ltd company money could be used to part pay the mortgage but can’t seem to find much clear guidance on this.
It’s obviously not a buy to let as we live in the house but the mortgage does cover the entire property including the land.
Any advice would be gratefully received.

If u take money out of the company as dividend u will have to pay income tax based on your tax bracket

Two things here - do you have mortgage company’s permission to rent out the land? And second, if you want to overpay your mortgage you call up the bank to make one off or regular payments.

@bakingmummy21 you can do anything you like with the money as long as you pay the relevant tax, it’s about how you efficiently remove the money from the company. Do you both work? If one of you doesn’t, you could set that person up as an employee on a salary below the tax threshold and take the money out that way? If both of you do, the issue will be down to whoever is in the lowest tax band to draw down. Your accountant should be able to give you advice on this as presumably you are paying corporation tax on the income at present?

I agree that the mortgage company might not be supportive of you renting out the land though.

You can, so long as the money is taken out of the company properly by way of dividends or through PAYE.

The whole point of a limited company is that business and personal activities are separated.

I would also ensure the mortgage company are ok with you renting out the land.

I'm wondering a little what the purpose of setting up the company actually was. (I assume you have sufficient other income that it is more tax effective?) But my specific thought is, how is the "right" of the company to lease the land that you, not the company, presumably still own, actually set up? To my relatively uneducated eye it would seem that the company could be paying rent for the land to you (as one of its expenses). If you can work out what level of rent is realistic in terms of any relevant income allowances, that might do it? You'd need to check if a portion of your mortgage interest could be assigned against that income, perhaps - though any of that could have capital gains tax implications down the line, maybe (though that may already be relevant with your current setup, I've no idea).

Sounds to me like it's worth a talk to your accountant. We've had good advice from ours when trying to work out how to use a family company appropriately.