Listed Under: Blog
In our last newsletter we talked about the upcoming tax changes for buy-to-let landlords, and forecast a rise in landlords buying properties through limited companies. A study of Companies House and Office for National Statistics data shows 4,560 property companies have been incorporated in the past three months, a 50% increase over the same period the previous year.
- The principal reason for the increased number of property business incorporation is that investors in the higher rate tax bracket will face new limits on their ability to offset mortgage interest against their rental income from the start of the 2016/17 tax year.
- However, the changes do not apply to companies. Company owners will also benefit from a lower rate of corporation tax which is due to be cut to 17% in the tax year 2020-2021, as well as potentially reduced Capital Gains Tax charges.
- Property investors should be aware that buying property through a company can involve additional expenses, such as higher loan fees, bank charges, and accountancy costs. Therefore incorporating tends to be most beneficial for investors with multiple properties in their portfolio; research by RSM suggests that it makes sense for investors with more than 10 properties.