A property investment consultancy says growing numbers of UK and international landlords are incorporating to manage their buy to let portfolios in the most tax-efficient way.
Thirlmere Deacon says it’s seen a 62 per cent rise in investors who have set up limited companies - a figure that comes on top of related data from lettings agency Hamptons, which says that in 2020 there were a record 228,743 buy to let firms set up.
Last year, there were a total of 41,700 buy-to-let incorporations, an increase of 23 per cent on 2019; the numbers have more than doubled since 2016, rising 128 per cent, when tax changes for landlords were introduced. Between the beginning of 2016 and the end of 2020 more companies were set up to hold buy to let properties than in the preceding 50 years combined, says Hamptons.
Stuart Williams, chief executive of Thirlmere Deacon, says the key draw for landlords is that fact that if they hold property in a limited company, they have the ability to offset 100 per cent of mortgage interest against profits, while those holding a property in their own name can offset just 20 per cent.
“Investing in property through a company provides landlords with higher levels of tax relief and personal tax savings. Landlords can grow their BTL portfolio more quickly, as there is no income tax on the retained profit, thus allowing more cash to re-invest. Although corporation tax is payable on trading profits, this is lower than the higher income tax rate” adds Williams.
“However, running a portfolio through a limited company is not right for everyone. One of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket. Profits can be used then for anything they choose - all paid for by the tenants.”
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