Buying a house with cash

This doesn't make sense really.

The vendor will see exactly the same amount of 'cash' in his bank account, at the same times, whatever means you use for raising said cash to pay him. You can use the money from your business, raise a mortgage, hold up a bank, whatever - the vendor probably won't even know how you got the money.

It *might* mean the vendor wants a quick sale rather than having to wait for a buyer to arrange a mortgage etc. You could apparently satisfy this requirement by using your company's money. Even if you do this you could quite easily raise a mortgage after having bought the house and repay some or all of what is effectively a bridging loan back to your business.

One final thought, the vendor might also know there is some problem with the property that will make it difficult to raise a mortgage, this possibility should be checked out carefully.

Perhaps the vendor really means he wants a buyer with no chain (ie. no house to sell). As you say, the actual source of the money is not too important, as long as none of it is tied up in another property. That's my understanding of the term "cash buyer".

Does it strike the OP that the asking price is perhaps a little low for the house, and that's one of the aspects that attracts him? If so, then I'd prefer the explanation that there's something fishy going on, like trouble with the building, or the surroundings, or the access, or... ...something like that. One wouldn't want, I feel, to provide oneself with a bridging loan that one ended up unable to pay back to oneself as a result of having bought a dodgy house.

I never thought about that. I'm new to owning a company aswell :) If I take a loan from my own company, am I liable for income tax on that money? given that if I were to withdraw the cash normally as dividends I'd pay 32.5% income tax on it.

I spoke to the estage agents who said it's a cash only sale because the vendor has been let down by numerous chain/mortage buyers and put it up as cash to spur them on.

Speaking as one prepared to own up to not _quite_ having a right of access to his own home, despite paying a solicitor far less than the solicitor asked for as a result of the solicitor screwing up the access-rights issue, and currently hiding behind an access indemnity insurance policy, you'd do well to be wary even of your own solicitor's statements on the worthiness of the sale, let alone the vendor's estate agent. IANAL, YMMV, etc...

The vendor can specify whatever he wants. You can make a counter offer which might be 'ill buy your house for X and I dont have a chain'. He can accept that or not. But if you dont have a chain, its hard to see that anyone sane would turn a good offer down. Perhaps he has specified his requirements too exactly to avoid a chain, without thinking through the consequences. AFAICS, without a chain, you effectively are a cash buyer.

If you want the house badly enough and it's a good buy (maybe get a full structural survey done) you could buy it with cash (borrow from your company) then get a mortgage on it after you've bought it and repay the cash (or as much of it as you can get a mortgage for)..

Rob Graham

No you wouldn't. With the 10% tax credit, you pay 22.5% on ten ninths of it, which in effect means you'd pay 25% on it. Well, on most of it, given that most of it would be above the higher-rate taxpayer threshold. That small part, ten ninths of which are below the threshold would be tax free.

By the way, does this money in the company represent profit on which

Offer 20% less and see how keen he is for cash.

Yes. You have to pay tax on the interest that would normally be paid on such a loan, at the inland revenue's official rate of interest. The company also has to pay NI on this.

The alternative is for the company to actually charge you interest on the loan at the inland revenue's official rate. Then the company would pay corporation tax on the interest received.

If you don't repay the loan within 9 months of the year end, you also have to pay 25% tax on the value of the loan. This tax gets refunded once you do repay the loan to the company.

A no chain but mortgage purchaser will need to have a survey done for valuation & insurance purposes.

A true cash purchaser does not - although he/she may be foolhardy to dispense with it.

the paranoid may wonder if thats the reason for the condition ..............

In message , david writes

Well... You are doing something right if you have made 270K in year 1!!!

This is not an unreasonable explanation - if you can get the cash together, you will be one of only a few, (unless it is a truly cheap deal), so should have a good chance of getting it.

To check the status of the property, have a survey done and a structural engineers report, along with a local search. These should alert you to any hidden problems.

In message , Tumbleweed writes

Not really - if finance is needed, then hiccups, delays, and failure, can occur, for reasons not currently clear to anyone, and outside the buyers control..

If cash is available, these problems are eliminated and it is in the buyers gift as to whether to buy or not.

In message , mo writes

Wonder if it's jamster or similar?

Surely if you take more than, what is it, the mid-30K threshold in dividends you will be paying 40% tax on anything above that threshold? So, wouldn't you pay company tax on the 270K profit and then take out a dividend which, once it goes over the mid-30K threshold would be 40% tax on it????

I suggest you get a good accountant - ESPECIALLY if you can make that much money in your first year's trading.

No, not unless the money is taken as salary, in which case there's an extra 1% NI on top and the company has to chip in 12.8% employer's NI (but escapes corporation tax because salary is an "expense"). So for every £1128 of pre-tax profit funding a nominal £1000 salary, £138 goes on NI and £400 on income tax, and the individual gets £590 in his pocket. The effective overall marginal tax rate is thus about 47.7%.

No, it would first get taxed at 19% and then again at 25%.

Whereas the higher tax rate on "normal" income, and on savings interest and capital gains, is 40%, the rate on dividend income is 32.5%. But there is 10% dividend tax credit to come off that, in return for inflating the dividend by a factor of 10/9. This is because the lower and standard tax rate for dividend income is 10%, with the same 10% tax credit -- as a lower rate taxpayer every £9 of dividend is treated as £10 on which 10% has already been deducted -- and the same is true at the higher rate, so for every £9 taken, this is treated as £10 on which 10% have already been paid, but since 32.5% instead of 10% are due, a further 22.5% needs still to be paid, i.e. £2.25, which is 25% of the actual £9 received.

So for every £1000 of pre-tax profit, the company pays £190 CT, leaving £810 to be given as dividend, which counts for tax purposes as £900, to be taxed at 22.5%, so £202.50 goes on dividend income tax (which is 25% of £810), leaving £607.50 in his pocket. The effective overall marginal tax rate is thus 39.25%.

I'd be loath to put all that cash into a house. What about going for an offset mortgage, with a 50% deposit on the house, and the balance in the tied account? That way you have no interest to pay on the mortgage, but you have the cash available if you have a crisis.