Should you buy for a receipt in your own name or in a limited company? In this video I'm not going to bore you to death with tax calculations and spreadsheets. Instead I'll start by giving you a quick but pretty accurate rule of thumb that I've observed from speaking to hundreds of investors every year. Then I'll explain why by running you through the pros and cons. And finally I'll share a free tool that you can use to help you confidently make the right decision so you can get on with making your investments. So let's cut to the chase. If you are a basic rate taxpayer and you're likely to remain that way, even after adding your property income on top, then personal ownership is likely to be best. Remember that if you own a property jointly that covers you for roughly up to about £100,000 of income between you. But you do need to be careful because your property profit might be higher than you think because of the way it's calculated, which I'll explain later. On the other hand, if you're a higher rate taxpayer and you're looking to build a portfolio of at least a few properties, then a limited company is more likely to be best, especially if you're interested in passing wealth to future generations or if you already own a business and that's where your capital is coming from. So that's the rough outline and maybe that's enough to make a clear card decision for you. Done! But for most people it won't be, so I'll take you through some of the pros and cons. Let's start with the downsides of limited company ownership that stop this from being automatically the right choice for everyone. The first is higher mortgage rates. Rates for limited companies tend to be half a percent or one percent more than for individuals. For example, I just looked at the mortgage works of 5 year fix at 75% loan to value. For a limited company it's 4.89% with a 3% product fee. For an individual it's 4.29% with a 3% product fee. And that difference will eat into the potential tax savings that will come to later. The next drawback is more complex finance applications. So you'll need to personally guarantee the loan even if you're using a company. And that means that you will often need to get separate legal advice from the company which adds cost. And if you've got multiple directors and shareholders of the company which you might do for reasons will come to later, there'll be questions to be asked about all of them as well. The next drawback is higher accountancy costs. So with a company you'll need an accountant to do all the annual filings. Now if you've got one company with lots of properties in it, that's not going to make that much of a difference to you. But if you've only got one property then that cost can put a real dent into your profits. And then finally there's the fact that companies don't have a capital gains tax allowance to use when you sell. But that's less of a big deal than it was because the allowance for individuals keeps being cut anyway. So if you don't need a limited company then you're introducing higher costs and a lot of complexity without there being enough of a benefit. But there are some compelling benefits for the right type of investor. So let's get into those. Just before we do though, if you're finding this video useful so far, please hit like and consider subscribing. It really helps me out and it makes it more likely that you'll see these videos in the future. Okay, let's get into the benefits of a limited company ownership. The first is tax rates. So if you want a higher rate tax payer then the corporation tax that the company will pay is lower than the income tax that you would pay. So you end up giving less of your rental profit away as tax. Another big benefit is that you can claim your mortgage interest as a cost. So if you got an interest only mortgage, the whole of your mortgage can be written off as an expense which reduces your profit and reduces the tax that you need to pay. You might think that individuals should be able to do this as well, but you can't. As an individual it's like your mortgage expense just doesn't exist. If you rent out a property for £1,000 a month, have a mortgage that costs you £300 in interest and other costs of £200. You'd think that you've made £500 profit, but for accounting purposes your profit is £800. Now for basic rate tax payers this doesn't actually make any difference because you can claim an allowance that offsets it. But the whole £800 in my example counts as income for the purposes of working out your tax bracket even though it's not really, which is why I said earlier that your income might actually be higher than you think it is. On the other hand if you're a higher rate tax payer and you're planning to let profits build up rather than living off from today, an unlimited company is likely to be best. But let's get on to the really good stuff. Oh my god, okay it's happening. Everybody's sick, I'm sick, everyone. And one of those is flexible inheritance tax planning. There are loads of options here. The first option is to use something called Freezer Shares to make sure that all future capital growth in the value of your portfolio isn't actually yours. That can go straight to children or it could even be written into trust for your children. So if all outside your estate and doesn't become an issue for inheritance tax in the future, another option is that the company can make pension contributions to directors which can include other family members and do so as a pre-tax profit which reduces the amount of tax it needs to pay. And the company can also employ family members and pay them for the work they do which again reduces the company's tax bill. There's so much more to this and really the inheritance tax planning options are for me one of the real killer benefits of limited company ownership that tends not to get talked about enough. But there is another benefit which is lending funds across from another business. So if you have another business already that's generating profits and that's where your deposit is coming from, then you can lend across or move across those funds so you don't have to withdraw them personally first and take a big tax hit. There are various ways of structuring that which you will want to take expert advice on. So how do you make the final decision about which option is right for you? But the sure answer is you don't, you work with a professional, it's too big a decision to try to figure out yourself as a non-expert. But before you talk to an expert you need to be able to give them all the right information about your plan so they can consider all the relevant factors when they're giving you advice. Things like how much do you earn? Where are your funds coming from? Do you plan to live off your property income? Do you have plans to pass your portfolio on in future? And plenty more. If you check the description there's a link to a checklist that I've put together, it's completely free, you can just download it, fill it in and then when you go and speak to a tax expert you'll be able to give them all the right information and they'll be able to give you the best advice. But the thing is you can have the best structure in the world but ultimately none of it matters if you make bad investments. And there's one single factor that has a bigger impact on the success of an investment than anything else. So watch this video next where I'll tell you what it is and share a ridiculously simple method with you that you can use to make sure you get it right every time.