“My company has loads of cash – should I buy a house to live in via my company?”

The answer to this is no – it’s a terrible idea. Here’s why:

1. One of the most valuable reliefs available to homeowners is Private Residence Relief, which exempts any gain on a sale*. Houses owned by companies don’t qualify.
2. Companies automatically pay a 5% Stamp Duty Land Tax surcharge when purchasing residential property. On a £500k property, that’s a difference in a £15k liability and a £40k liability.
3. A company may have to pay the Annual Tax on Enveloped Dwellings (ATED). That’s £4,450 every year for a property worth £500k.
4. If the occupier doesn’t pay market rate rent to the company, they’ll have a taxable benefit for the equivalent amount each year. So a £20k rent would give a higher-rate taxpayer an £8k personal liability each year**.

A better idea might be to borrow the cash from the company and use that to buy the house personally, but that also comes with tax consequences.

*Private Residence Relief is also the costliest tax exemption to the exchequer each year, amounting to relief of around £31bn – more than VAT relief on food and Income Tax relief on pensions.

**The company would also have to pay 15% Class 1A NIC on the taxable benefit.