Personal Ownership vs Ltd Company

When investing in property in Northern Ireland, deciding whether to purchase an additional property in your personal name or through a limited company (“Ltd”) is one of the most important decisions you will make. Each approach has distinct advantages and considerations, particularly concerning taxation, liability, and administrative responsibilities. We've highlighted below what we think are the main points that you need to consider.

Key Considerations:

• Income Tax vs. Corporation Tax: Individuals pay Income Tax on rental income, with rates up to 45%, whereas limited companies are subject to Corporation Tax, currently at 19%

  
  

• Mortgage Interest Relief: For individuals, mortgage interest relief has been restricted to a basic rate tax reduction. In contrast, limited companies can deduct the full mortgage interest as a business expense

  
  

• Stamp Duty Land Tax (SDLT):

  • Additional Rates: Both individuals and companies face a 3% surcharge on additional residential properties

  • Higher Rates for Companies: Companies purchasing residential properties over £500,000 may incur a 17% SDLT surcharge on the property value

    
    

• Capital Gains Tax (CGT):

  • Individuals: Pay CGT at 18% or 28% on property gains

  • Companies: Gains are subject to Corporation Tax, potentially resulting in a lower effective rate compared to personal ownership

    
    

• Limited Liability:

  • Personal Ownership: Owners are personally liable for debts and legal actions

  • Company Ownership: Shareholders' liability is limited to their investment, offering protection of personal assets. However personal guarantees may be required if a mortgage is used to finance the acquisition of a property through an Ltd

    
    

• Administrative Responsibilities:

  • Individuals: Simpler administration with annual self-assessment tax returns

  • Companies: Require annual accounts, corporation tax returns, and adherence to company regulations, increasing administrative tasks

    
    

Conclusion:

Choosing between whether to acquire an additional property in your personal name or to acquire the property through a limited company depends on individual circumstances, investment goals, and financial considerations. While company ownership offers tax advantages and liability protection, it comes with increased administrative responsibilities, potential SDLT implications and the possibility of a higher interest rate being charged by a lender/mortgage provider.

At Kiwi Property Management, we provide comprehensive guidance on all relevant considerations when deciding whether to establish a Ltd company or acquire property in your personal name. Feel free to contact us with any questions you may have by going to the “Contact Us” section of our website.