Individual Property Investors
As an individual property investor in the UK, it is vital that you know about all of your options regarding the management of your investments. By not being fully aware of all your options, you open yourself up to greater tax liabilities and risks. Individual property investors that aren’t fully clued up often pay the most through their wallet. Here is a simple article that can help you save tax as a property investor.
Individual property investors that are unaware of the all of their options run the risk of paying much more money in tax than they need to and wasting their hard-earned money. Not being fully aware of what you are doing and what you can be doing means that you open yourself up to unnecessary risks and liabilities. Here is some simple advice on how you can be saving money as an individual property investor.
Managing through a Limited Company
The most efficient way that individual property investors can save money on their tax bill is by managing their properties through their own limited liability company. Doing this can save money in a number of ways. By running your individual properties through a limited liability company, you can benefit from the extra limited liability protection that a company is able to offer. In addition to this, limited companies are taxed very differently to individuals. Individual property investors are liable to pay income tax on their profits; specifically they must pay 40% tax on their higher rate income as well as 45% on their additional tax rate. Limited companies are able to enjoy at much lower corporation tax rate of 20%. Therefore tax rates favour companies and business much more than individuals.
Therefore, managing your properties through a limited company not only offers extra legal protection, but it is also able to protect your profits from higher rates of tax.
Additional things to consider
Despite the benefits listed here there are also a number of important considerations about choosing to manage your property through a limited company. Once again it is important be aware of all your options and how they will ultimately impact you and your tax bill. For example, managing your properties through a limited company might lead to a smaller tax bill but it also makes it more difficult to extract profits from the company, since the money that is made will have to be held in that company. Because of this, managing your property investments through a property company may not be the best option for someone who regularly needs access to their profits often. In addition to this individual property investors are also able to enjoy a wider range of capital gains tax reliefs when compared to limited companies.
Operating through a limited company may be beneficial for those who find that they are involved in the development side of the property business. It can also be more tax efficient for those who are investing in property for the longer term as part of their retirement plan.
If you would like to learn more about taxes as a property investor, or if you would like to learn more about Accountant Croydon and how we can help you and your business, you can visit our homepage here for more information.