Accounting BTL mortgage in a Ltd

How to account for buy to let mortgage in a Ltd company

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Not a practicing accountant but for educational purposes how do accountants report purchase of BTL into Ltd company?

Bank mortgage 200k:

Dt Asset Cr Lender

Deposit 50k:

Dt Asset Cr Lender
Dt Lender Cr Bank
Dt bank Cr Director loan

Legal fees and Stamp duty 10k: the same as above 

Dt Asset Cr Vendors 
Dt Vendors Cr Bank
Dt Bank Cr Director Loan

Replies (15)

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By Paul Crowley
02nd Apr 2024 20:46

The start point, is it a company mortgage? Definitely not a mortgage to the director?
If yes
the result is
Debit the full cost of property to fixed assets
Credit the mortgage to bank loan
Credit the rest to Directors loan
Assuming the director put money into the company in the exact sums needed to pay for the property.

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Replying to Paul Crowley:
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By naty1975
02nd Apr 2024 21:48

Yes, companies mortgage. Thanks for confirming

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By FactChecker
02nd Apr 2024 21:18

Why?

The purchase of BTL by Ltd company, that is (not Paul's comments).
If the objectives are clear and it's not yet too late, then a re-think may be in order before considering the books.

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Replying to FactChecker:
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By naty1975
02nd Apr 2024 21:49

Thanks, Asking for the future

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Replying to FactChecker:
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By Paul Crowley
02nd Apr 2024 23:06

+1
Always consider the exit.
Any client choosing that route should definitely know why they want to do it.
Particularly if they already have a separate trading company.

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paddle steamer
By DJKL
03rd Apr 2024 09:39

Do remember future revaluations and deferred tax if FRS102 reporting. Given banks can be very literal re accounts your in future saying property now really worth 500k not its original cost of 250k, despite what accounts say ,can be difficult for them, so if further company property purchases are intended, and will be relying on hoped for property value increases ,then FRS102 likely the way to go.

Do also remember Non Trade Loan Relationship Debits re the CT600 and corporation tax.

But, as mentioned above, and given possibly more expensive re SDLT/LBTT etc plus double tax on future extraction etc, why?

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Replying to DJKL:
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By paul.benny
03rd Apr 2024 09:56

Good points
+1 to all

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Replying to DJKL:
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By naty1975
03rd Apr 2024 18:50

DJKL wrote:

Do remember future revaluations and deferred tax if FRS102 reporting. Given banks can be very literal re accounts your in future saying property now really worth 500k not its original cost of 250k, despite what accounts say ,can be difficult for them, so if further company property purchases are intended, and will be relying on hoped for property value increases ,then FRS102 likely the way to go.

Do also remember Non Trade Loan Relationship Debits re the CT600 and corporation tax.

But, as mentioned above, and given possibly more expensive re SDLT/LBTT etc plus double tax on future extraction etc, why?


That's true. I would want to buy into Ltd company as now thats more tax efficient way if I am a higher tax rate payer. Also, once sold I just pay corporation tax on any profit which is lower the sdlt.
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Replying to naty1975:
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By Paul Crowley
03rd Apr 2024 19:09

Not sure you followed the posting you are replying to.
Best get advice before you do it for real.
Some accountants would agree with you, because there are more fees doing it the company way.

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Replying to Paul Crowley:
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By naty1975
03rd Apr 2024 20:55

Paul Crowley wrote:

Not sure you followed the posting you are replying to.
Best get advice before you do it for real.
Some accountants would agree with you, because there are more fees doing it the company way.


I appreciate all responses, for sure need to think well before committing to anything
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Replying to naty1975:
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By Paul Crowley
03rd Apr 2024 20:56

Are you aware of dividend tax?

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Replying to Paul Crowley:
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By naty1975
03rd Apr 2024 21:05

Paul Crowley wrote:

Are you aware of dividend tax?


Yes, of course, if to keep profits in Ltd and only withdraw up to minimum it can be tax efficient too
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Replying to DJKL:
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By HL86
03rd Apr 2024 22:10

Also ATED if the value of the property is over 500k

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Replying to HL86:
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By naty1975
03rd Apr 2024 23:49

HL86 wrote:

Also ATED if the value of the property is over 500k


Wow, never heard of that. Good to know. I don't think I will be buying that expensive properties, but it's good to know
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Replying to naty1975:
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By HL86
04th Apr 2024 19:29

Not just the price you purchase it at. You need to check the current value of property as per HMRC's guidance. Plenty of us accountants out there that deal with UK Landlord Tax and the various complexities and compliance requirements. Just Google " UK Landlord Tax"!

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