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TODAY'S OTHER NEWS

BTL landlords urged to consider property incorporation

Now is potentially a good time for buy-to-let landlords to become limited companies, according to accountancy firm MJ Bushell. 

Property tax specialists at the company believe that landlords could benefit from the recent stamp duty holiday by incorporating their existing portfolio into a limited company. 

The firm sees the temporary increase in the stamp duty threshold for all residential purchases from £125,000 to £500,000, until the end of March next year, as an opportunity not to be missed. 

Matt Warwick, tax senior at MJ Bushell, commented: “Although landlords buying additional properties still face a 3% SDLT surcharge on their property purchases, they are not required to pay the standard rate of SDLT on top for homes valued £500,000 or less.

“This also applies to the transfer of properties into a business, which would normally attract a substantial SDLT bill. In fact, the savings could mean they pay up to half as much.”

Landlords operating as a limited company structure means they can benefit from mortgage interest tax relief on buy-to-let properties, which is not the case for landlords classed as individuals.

Warwick added: “Before the SDLT holiday there had been a lot of debate about whether incorporation is the right approach to take and whether it saves sufficient money to merit the switch.”

Poll: Do you plan to use a limited company to acquire property in the near future?

PLACE YOUR VOTE BELOW

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    Has anyone cautioned that a transfer into a company may trigger a capital gain and tax on that gain?

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    Yes, my accountant advised against it

     
    Matthew Payne

    It will do, but each case will be individual, so any costs or savings will change dramatically depending on how much the property has appreciated in value since purchase, and how long they are realistically likely to own it going forward, so weighing up the future savings of CT vs Income tax against the immeidate CGT liabilty. Will make sense for some to make the changes, others not.

     
  • Paul Barrett

    Remember if too many S24 LL incorporate at GREAT expense Govt will slap a sort of S24 on those incorporated.

    Govt will not allow S24 LL to escape eradication.

    That is the whole point of S24.
    Govt likes the idea of corporate LL.
    If it was really genuine about this it would allow ALL S24 LL to convert to corporate status for free.

    But of course it won't do this as it would miss out on a CGT bonanza.
    Many S24 LL are finding their taxes exceed their income!!

    They need to sell up or reduce their borrowings to the extent that S24 DOESN'T affect them.
    That could mean giving up a job.

    S24 is however an evil tax and should be abolished immediately.

  • Paul Barrett

    @matthewpayne

    There will also be many LL who have remortgage on increased values over the years and now can't afford to incorporate or even sell until there is enough equity to pay CGT.

    These are zombie LL trapped by their borrowing on previous equity.
    Even more invidious if a S24 LL

  • icon

    I have 11 reveal properties and the cost of transferring them into a ltd Co was ridiculous. I was advised not to. I'm selling up instead... One per year... I've had enough... Got to be an easier way to earn a living!

  • icon

    @matthewpayne

    if all existing properties owning outright are transferred to an incorporation before the new resident property is purchased , will the 3% surcharge still apply to the new property which will be the only property owned directly?

    Matthew Payne

    No. It only applies to the purchase of additional properties so if you don't own any, irrespective of how or why you don't own any, in this case selling them to a company effectively, then you are treated just as normal buyer making an isolated purchase. People come off the property ladder for all sorts of reasons, but they don't have to pay an extra 3% every time they get back on it, as long as they only own one property at a time.

     
  • icon

    They are all great at telling us what we should be doing. I suppose they are still wet behind the ears just like the Children running Government born into riches with a silver spoon in their mouth, wasting trillions that we haven't got, total mismanagement driving the Country into the ground & us with it.
    To incorporate they tell us now best thing since sliced bread because of Stamp Duty temporary reduction on some price bracket Properties, they must think we are right amadain's or have very short memories indeed. George Osborne doubled SD on private LL just a few years ago which was outrageous, now they turn around and half it partly temporarily and it' supposed to be doing us a great big favor, now we have taken on the roll of DSS as well aren't we wonderful people

  • Paul Barrett

    Wouldn't it be a great idea if Govt instigated a buy back programme of properties for Social Housing.
    I'm sure Councils would have LL flocking to them to sell their properties.
    Maybe a discount on CGT for selling at say 10% BMV.

    It would be a great way of recovering properties for immediate social housing usage.

    It will take at least 10 years for the 2 million social homes sold under RTB to be built.

    Govt could buy back in 1 year easily as there are definitely LL who would wish to sell 2 million properties now.

    icon

    "Wouldn't it be a great idea if Govt instigated a buy back programme of properties for Social Housing."...

    Sounds promising Paul, but at a convenient price for whom ?

     
  • Paul Barrett

    Price would be market price less 10% with a CGT discount.
    Govt has 100 years to pay for the property.
    Still cheaper than building 2 million Social homes and they are available NOW!.

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    How about the price you paid +1% with a CGT discount ?

     
  • Paul Barrett

    Nope Seb that would undermine a LL business.
    No LL is going to devalue what they have achieved over the years.

    Councils DON'T get to buy massively BMV.
    Current market price is the only way LL will play ball.
    With suggested relevant discounts on price and CGT.

    But Councils DON'T get such properties BMV.

    Just like the Govt paid off slave owners so that slavery could be abolished so they should pay off LL willing to sell to Councils to restore Social housing and to add to to it.

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    What, exactly, have you achieved over the years ?

    ""You've got to know when to hold 'em
    Know when to fold 'em
    Know when to walk away
    And know when to run
    You never count your money
    When you're sittin' at the table
    There'll be time enough for countin'
    When the dealin's done""

     
  • Paul Barrett

    What have the millions of LL achieved over the years.
    Well they have housed over 4 million people who otherwise wouldn't have been able to source accommodation.

    As such by maintaining property for tenant usage then the value of the business would be recognised in any sale process.
    By being in the property market then values have increased.

    By being in business there is the possibility that values may increase.
    LL are entitled to profit from such gain by them being in the market.

    Obviously NO guarantees that this would occur.
    But any business is a considered gamble.
    There are NO certainties.
    Business has the right to profit if it gambles successfully.
    That is why it risks capital on investments of all types

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