Question on forming company and corporate tax rate

Goose81

Hi,

I am hoping to come into some money in the near future, possibly 200k or so. My plan is to buy a property and rent it for my pension.

Is it possible for me to form a company and use it to buy the property to minimise my tax? If multinationals pay 12.5% is it possible to do the same in this situation?

Not looking for hugely detailed advice but just an answer as to whether it's possible and would it be worth me going to an accountant to discuss.

Thanks

TP_CM

Goose81 wrote: »

Hi,

I am hoping to come into some money in the near future, possibly 200k or so. My plan is to buy a property and rent it for my pension.

Is it possible for me to form a company and use it to buy the property to minimise my tax? If multinationals pay 12.5% is it possible to do the same in this situation?

Thanks

The rent goes to the company and you, as a director, would draw it down as a salary paying standard income tax. Except you'd have to pay a few thousand per annum on accountancy fees not to mention the 200/300 euro cost of setting up the Ltd company in the first place.

Edit: In addition: the 12.5% would only come into play if you leave funds in the company account after year end (you don't draw down a salary). You pay 12.5 per cent on that, and eventually, whenever you draw down the funds as salary you pay the income tax as well.

Goose81

TP_CM wrote: »

The rent goes to the company and you, as a director, would draw it down as a salary paying standard income tax. Except you'd have to pay a few thousand per annum on accountancy fees not to mention the 200/300 euro cost of setting up the Ltd company in the first place.

Edit: In addition: the 12.5% would only come into play if you leave funds in the company account after year end (you don't draw down a salary). You pay 12.5 per cent on that, and eventually, whenever you draw down the funds as salary you pay the income tax as well.

Thanks, so it seems that the punitive tax rates on landlords make investing in a property to rent uneconomical then?

Seems to be no way to limit tax liability to use it as an investment..

ulster

TP_CM wrote: »

The rent goes to the company and you, as a director, would draw it down as a salary paying standard income tax. Except you'd have to pay a few thousand per annum on accountancy fees not to mention the 200/300 euro cost of setting up the Ltd company in the first place.

Edit: In addition: the 12.5% would only come into play if you leave funds in the company account after year end (you don't draw down a salary). You pay 12.5 per cent on that, and eventually, whenever you draw down the funds as salary you pay the income tax as well.

And he'll have that honkin professional services surcharge as well. Ugh.

Goose81

I suppose if I am paying cash or nearly all cash best case would be to buy a property with more than 1 bedroom, claim I live there (keep the room locked and say I travel for work) and use the rent a room tax free allowance of 14k per year..

hold my beer

A self administered pension scheme might be what you're looking for. Get professional advice is the best piece of advice I can give you..

TP_CM

Goose81 wrote: »

Thanks, so it seems that the punitive tax rates on landlords make investing in a property to rent uneconomical then?

Seems to be no way to limit tax liability to use it as an investment..

I wouldn't say uneconomical. If you have a low maintenance property and a good tenant you probably wont find a better return on investment, even with income taxes. The problem is the risk of getting a bad tenant. Landlords are simply not protected enough to make it an obvious choice. You could have a tenant who decides not to pay for years and there is nothing you can do about it. But it's a fairly low risk in my opinion. Others would disagree.

DmanDmythDledge

Goose81 wrote: »

Hi,

I am hoping to come into some money in the near future, possibly 200k or so. My plan is to buy a property and rent it for my pension.

Is it possible for me to form a company and use it to buy the property to minimise my tax? If multinationals pay 12.5% is it possible to do the same in this situation?

Not looking for hugely detailed advice but just an answer as to whether it's possible and would it be worth me going to an accountant to discuss.

Thanks

Corporate tax rate on rental income is 25%, plus a close company surcharge will increase the overall effective rate again incl tax on getting money out of the company. Also won't get usual CGT reliefs when cashing out shares etc. Not really advantageous unless you're setting up a trading company

Rulmeq

Goose81 wrote: »

I suppose if I am paying cash or nearly all cash best case would be to buy a property with more than 1 bedroom, claim I live there (keep the room locked and say I travel for work) and use the rent a room tax free allowance of 14k per year..

While you could do that, just to be clear it would be illegal, and if you tried to treat the tenant as a licensee and they went to the PRTB over it, or they decided to let revenue know about it, then you would face interest and penalties (and have your name published in the media). So weigh up the potential downsides against just paying your taxes (if you're paying taxes, you're making a profit)

Bass Reeves

200k gives you option investing in property. If you are investing try to invest in property within 30-40 minutes of where you live. Do not invest too near you try to have it at least 20 minute+ away. These are not options but good choices. If you are not investing in Dublin or some of the more expensive city situations a multiple property investment is possible.

However I would not start with two properties straight away. Yield is the most important factor however it should not be at the cost of hassle. If you can buy a property in the 200 - 250k range would have repayments in the 550-850/ month range. A yield in the 6-8% range would cover the repayments fairly comfortably.

If you are happy with your initial investment in 1-2 years time you can invest in a second property. If you consider it too hard to invest in a second . property you can pay off a share of the loan or invest elsewhere.

Goose81

Bass Reeves wrote: »

200k gives you option investing in property. If you are investing try to invest in property within 30-40 minutes of where you live. Do not invest too near you try to have it at least 20 minute+ away. These are not options but good choices. If you are not investing in Dublin or some of the more expensive city situations a multiple property investment is possible.

However I would not start with two properties straight away. Yield is the most important factor however it should not be at the cost of hassle. If you can buy a property in the 200 - 250k range would have repayments in the 550-850/ month range. A yield in the 6-8% range would cover the repayments fairly comfortably.

If you are happy with your initial investment in 1-2 years time you can invest in a second property. If you consider it too hard to invest in a second . property you can pay off a share of the loan or invest elsewhere.

Thanks, just to be clear. Do I pay income tax on any money I would receive as a landlord or only money over the cost of servicing a small mortgage if I had one?

I.e I have investments and I only pay tax on any gains I make, is this the same with property?

Bass Reeves

Goose81 wrote: »

Thanks, just to be clear. Do I pay income tax on any money I would receive as a landlord or only money over the cost of servicing a small mortgage if I had one?

I.e I have investments and I only pay tax on any gains I make, is this the same with property?

The interest is tax deductible. After that maintenance costs are tax deductible. Capital repayment are not allowable against interest.