With the post pandemic rise in popularity of staycations, holiday lets are as popular as ever. With 83% of people who took a staycation last year planning on doing the same again this year, owning a holiday let has great income potential.
Buying Through an Existing Limited Company
As long as your limited company is trading then there are tax and other advantages to buying an investment property through your company, whether you choose a holiday let or a long-term rental. However, if you decide to sell your company in the future, it can be a complicated and expensive process if you decide you would like to keep the property.
Buying an investment property will mean that you’ll pay the higher rate of Stamp Duty, unless the property you are buying is already in a limited company. You then buy the shares in the company, bypassing the higher level of Stamp Duty, paying the 0.5% payable on shares instead.
Using an SPV (Special Purpose Vehicle)
Another option is to use an SPV. A special purpose vehicle is a legal entity that is created for a narrowly defined purpose. In property investment they are used for purchasing and holding residential buy to lets, holiday lets or for property development. Usually set up as private limited companies, they can also be Limited Liability Partnerships (LLP) or other types of businesses. They provide a clear separation between your trading business and your investment properties.
Benefits of Buying Property Through a SPV
- Offset Mortgage interest
- Profits retained in company rather than classed as taxable personal income
- Director’s Loans can fund deposits
- Pension funds can be used to finance purchases
- Generally, more tax efficient for higher rate taxpayers
- Ringfenced from other assets and liabilities
- Offers ownership with different percentages
- Succession planning for families
Holiday Let Mortgages
Mortgage companies are usually keener to invest in an SPV rather than a company which has trading activities unrelated to the property. Mark Jones and Richard Young of www.jonesandyoung.co.uk are part of our trusted Tribe Club Network and specialists in mortgages for self-employed and other complex mortgages.
You Deserve A Break
Of course, this is just a quick overview of buying a holiday let and there are many other pros and cons to consider. One of the main highlights is having your own place to go to enjoy holidays with your family and friends.
Did you know that we offer a Business Caretaker Service to business owners? Find out more here.