Director: rent vs salary

Martin14

Registered User
Messages
12
Hi,
Quick question;

I am one of two managing directors and we recently purchased some of the premises in which our ltd company works from.

Obviously up till now iv taken salary, but now that I own the premises, what are the tax benefits, if any, of me taking rent off my company instead(on top) of my salary???

Any advise appreciated
Thanks
 
You'll have to provide more information if you're going to get any level of meaningful replies. What level of salary do you currently enjoy? Have you a mortgage on the property? Are you the sole owner or do you own it with others? Have you asked your accountant?
 
From a pensions point of view, you need an earned income. Even if you don't have a pension now it may be of benefit to you in the future if you have some sore of earned income, even a nominal amount, as it will give you the choice of making larger contributions if you wish.

Does the PRSI on rental income count towards the Old Age Pension?

Steven
www.bluewaterfp.ie
 
Ok, alittle more info

There are 2 directors of the company, and we jointly own 1 of the 2 factories of which we work from. Will split everything 50/50. There is no mortgage on the property.

Currently earn approx 42k gross

At the beginning of this year, set up a new pension, 1k per month each

Company is now 5 years old, and is running good, reaching much higher than expected profits for 2015.

Looking to increase directors income, and was curious to see would it be beneficial to pay ourselves rent instead of wage/salary from a tax point of view. Obviously any increase in salary will incure 50%+ tax

Iv yet to discuss with our accountant. I'm considering making an appointment with a good tax consultant as I have another few issues I'd like clarified.

Thought I'd ask here first, so as to be prepared, and seems like some good information on here too

Any advice appreciated
 
The tax trearment of rental income is generally far more harsh and restrictive than that of salary income. There are no significant tax benefits to outweigh this, unless you have mortgage that was raised to buy, extend or improve the property, and/or unless you have rental losses elsewhere. So you'd normally be better off getting paid extra salary rather than in the form of a rent charge.

However, you really need to be discussing basic issues like this with your accountant - there is always a risk that the information we give you here is misleading as we don't know the full facts of your situation.
 
The tax treatment of rental income is generally far more harsh and restrictive than that of salary income.

Wow! I assumed it was the same although no disadvantages to salary.

Possible advantages to salary over rent, though most don't apply to this particular query.
  • Higher salaries probably allow higher pension contributions
  • A higher salary closer to retirement might allow a higher tax-free lump sum from your pension
Possible advantages of rent over salary
  • Can set interest payments against rent
  • Could set other rental losses against rental profits
  • Timing. Pay rent on 1 January. Pay tax in November. Pay salary in January, pay tax in January
 
Ok thanks guys

Thought it might be more beneficial from a tax point of view but obviously not.


Actually, I'd like to speak to a tax consultant about a few things, could anyone recommend me someone, I'm based in the west but I suppose anywhere as I'd be willing to travel to see someone whose good, thanks
 
As I already said, you should first be talking to your accountant, who should be able to recommend a suitable tax consultant if you need one.
 
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