Can My Limited Company Pay My Mortgage?
What about other expenses?
Posted by Helen Beaumont on 01/01/2020 @ 8:00AM
You may have heard of salary sacrifice arrangements, but the rules were changed in 2017 so you must carefully decide if you want your limited company to pay your mortgage ...
If you're thinking of using your limited company to pay your mortgage, ensure you get proper tax advice first!
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In a limited company, one benefit option that is often overlooked is the ability to subsidise an employee's mortgage payments or to even loan a deposit for a property. But do remember a benefit in kind would arise.
So, if a mortgage payment, or another kind of personal expense, is made on behalf of an employee, it is treated as though they have received taxable income.
In normal circumstances, an employee would have to pay both income tax and NIC before getting their net salary, and then make their mortgage payment. In this scenario, they only pay income tax on the amount of the mortgage payment and the limited company pays the NIC, but can also claim corporate tax relief on it.
This also applies to company loans. A company may subsidise a deposit via an interest-free loan and for loans under £10,000, no benefit in kind arises. However, remember that larger loans to directors must be fully repaid within 9-months of the company's year-end or HMRC will charge tax at 32.5% on any outstanding amount.
Remember that the appropriate documents must be drawn up for the loan, detailing the terms of the loan, how it will be repaid and by when!
It is also possible for a company to claim a tax-free relocation allowance of up to £8,000 on certain expenses; any more than that and the relief can be deducted from the total amount and tax would only be paid on the excess. It has to be noted that the employee's existing residence must be an unreasonable daily commute for HMRC to allow relocation expenses.
Care must be taken when agreeing to pay these expenses and you must ensure the arrangements are HMRC compliant. Each situation is different so I strongly recommend you get proper tax advice before making a final decision.
Until next time ...
Would you like to know more?
If you'd like to learn more about what your limited company can and cannot pay when it comes to mortgages, loans and relocation expenses, why not call me on 01908 774323, leave a comment below or click here to ping over an email and let's see how I can help you.
About Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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