Renting Furniture From Your Own Limited Company


Simon Misiewicz

2nd January 2015

Posted by Simon Misiewicz on 2nd January 2015 

Do you have furnished properties?

Are you using a limited company to manage your properties & tax?

If you have answered yes to either of the above questions then this article is for you.

The Diagnosis

Tax issues need to be diagnosed in order to be understood for a remedy to be implemented.

If you rely on your limited company for investment funds and you pay for furniture and white goods then you will be taxed on the wages / dividends that you take from the company (1).

If you are a high rate tax payer then you will be taxed an additional 22.5% in tax.

The Treatment

Applying the right tax reducing medicine to your tax illness.

Instead of taking money out of a limited company to invest in furniture why not buy the furniture in the company itself? The company can charge (for example) £5 per week for a washing machine. That cost would be £60 per year.

The company will obviously make a profit of £60 per year and taxed at 20%. The tax therefore being £12.

However, if you have rented the furniture to you as a high rate tax payer then there is a tax saving of £60 X 40% being £24.

Overall there is therefore a tax saving of £12.

In addition as a high rate tax payer you would have paid an additional 22.5% of any money that was taken out of the limited company to pay for furniture / white goods (1).


Let us go through an example to clarify matters: Joe buys £5K furniture and is already a high rate tax earner. Therefore the amount of money Joe takes out of the limited company is taxed at an additional 22.5% in tax (2).

The amount of tax Joe would have to pay is therefore £5K X 22.5% being £1,125. If Joe had purchased the furniture and white goods in the limited company then this tax would be avoided.

If Joe’s furnished property generates £6,000 net rental income then he could claim 10% wear & tear allowance, which I discussed in an earlier article (3). The amount of tax relief would therefore be £600.

Joe’s tax position would therefore be

  • £1,125 tax paid on dividends
  • £600 tax saved on wear & tear allowance
  • £525 net tax paid

If Joe purchased the furniture in his limited company and charged a rental fee of £2,000 then the overall tax position would be:

  • £400 corporation tax paid (20% of £2,000)
  • £800 tax saved on renting furniture (40% of £2,000)
  • £200 overall tax savings

As you can see that it is tax beneficial to rent furniture / white goods from a limited company as a high rate tax payer. There is no tax benefit if you are a basic tax payer.

Precautionary measures

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