Building your company portfolio can provide you with a greater access to equity, brand familiarisation and can offer you multiple streams of income. There are various aspects to consider while creating the perfect portfolio as a limited company.
1. Paying Corporation Over Income Tax
By 2020, corporation tax is predicted to drop to 17%. As private landlords are paying an income tax of 40% for higher-rate taxpayers, this puts limited companies at the greater advantage as they pay tax on profits as opposed to income and are therefore approached in a different way to individual landlords.
2. Dividends at a Lower Tax Rate
Once you reach your personal allowance, dividends are then taxed at 7.5%. This will continue until income is received through higher-rate taxpayers. From there, the rate is increased to 32.5% and 38.1% for additional-rate tax payers.
However, it is common to receive £2,000 of tax-free company dividends each year through a limited company.
3. Lack of Premium Loans
There is a wide range of opportunities for limited companies, and due to the scale of the business, it is not usually necessary to pay a premium fee to access finance.
This shows that limited companies have more advantages as opposed to private landlords, seeing a smaller number of financial outgoings.
4. Limited Landlords See Greater Loans
Affordability has been affected by the underwriting criteria for landlords. Usually, 145% of interest payments are required for rentals via private landlords.
The Prudential Regulation Authority’s adjustments did not have any effect on the portfolios which are managed through limited companies, and the typical rental cover holds stands firm at 125%.
5. Growth for Your Portfolio
Most limited company profits do not require any income tax. This means that the framework of the limited business structure allows for capital to be directed more towards building portfolios.
A strong company portfolio has the potential of boosting a limited company, conveying the history and experience of the business. The key to any successful company portfolio within the industry is showing high levels of diversity.
Proving that your company is flexible and fluid with their investment management, your portfolio will see a much faster growth.
Compariqo Finance offers bespoke re-financing solutions to the property sector. Contact our advisors if you are considering further finance on your investment portfolio.