Business or personal? The right approach to investing in property

By Tom Moore

For some time now, investing in property has been seen as a fairly sure-fire way of protecting your wealth into the future. After a turbulent year, you may be looking to invest in order to protect your savings, whether it’s for yourself or your family. But where do you start? What do you need to know and what is the right approach to make sure your investment works for you? To answer those questions, we spoke to Tom Moore, Tax Manager at Bulley Davey.

Thanks for your time, Tom, could you start by talk to us about the implications of investing in property? Where should people start?

“Of course. Property is often seen as a safe harbour for people’s money and that is because it often offers quite good returns on investment. There are risks involved, as with any investment, and particularly in the wake of COVID-19 – but things like the government’s stamp duty land tax holiday have made property investment quite attractive at the minute, although that has been countered by rising house prices.

“The main implications for investing in property come in the form of taxes – and what these are will depend on how you approach investment. That’s because you can most commonly either purchase property in your own name or set up a limited company and purchase it via that company. In your own name you’ll have income, capital gains and stamp duty land tax – whereas with a company you’ll have corporation tax, stamp duty land tax and income tax on the salary or dividend (the money) you take from the company.”

You mentioned purchasing in your own name or setting up a limited company, how do you know which to pick?

“That’s a great question. When I meet with people who want to invest in property, I always ask a few questions – what is your level of personal income? Do you need the money from rental income to supplement your income? How long are you thinking of investing in property?

“The reason I ask these questions is because it gives a very quick understanding of the right approach. While setting up a limited company might seem more desirable, given that tax rates are more favourable, if your rental profits do supplement your income it may be better to have it in your own name. You’ll pay a little more in tax, but you’ll avoid the admin required of a company, as well as professional fees.

“Equally, there is an exit charge if you decide to sell a property within a company and withdraw the money. This is why I always ask how long people want to invest for, because if you want to invest and sell a property fairly quickly, it’s likely that you’ll pay less with a personal approach.”

How would someone go about setting up a limited company? Is it something experts like Bulley Davey can do?

“Absolutely, at Bulley Davey we can be the first port of call if someone’s thinking about investing in property – in fact if you start anywhere else, they’ll often ask if you’ve had tax advice first! Our first meeting is always free, so we encourage people to come and meet with us, and let’s look at how we can make things work for you – because there’s no one size fits all.

“We’ll take into account your personal circumstances and advise on the best route forward. In our role, we can set up a limited company, prepare accounts and taxes – as well as advising on things like stamp duty land tax – and we can work together with mortgage advisers and solicitors on your behalf.”

What would be your key advice for someone looking to invest in property?

“My advice would be research. Investigate your options and talk to the experts – our doors are always open! Investing in property isn’t quite as easy as it seems on TV – but it can be done and it is, more often than not, a good investment.”

To arrange a meeting with Bulley Davey, visit their website

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