Landlords still reeling from the changes in the tax system removing the ability to deduct mortgage interest from their costs of their property portfolio for higher rate tax payers
announced in the Budget.
More property companies created
Latest reports in the
Telegraph have indicated that some landlords have responded by incorporating their rental businesses and tranfering their property portfolios into a company. Companies are not governed by the same restrictions affecting individual landlords. Companies House indicate that 4560 property companies have been incorporated in the past 3 months alone. This is a rise of 50% on the level seen a year ago. Corporate landlords will also benefit from falling rates of corporation tax which is due to fall to 17% by 2020-21.
Should landlords incorporate their property rental business?
We recently looked in details at the
tax advantages to a landlord by incorporating your property rental business. In summary, it is very difficult to generalise as each landlords portfolio and gearing is very different along with their other financial commitments. As a Director of several limited companies I know full well the extra burdens, cost and time wise that incorporation involves. For many small scale landlords with just a couple of properties the incorporation route is unlikely to be worth doing. However, those landlords with portfolios and loan costs that a larger and who are comfortable with corporate requirements it's something that is worth a serious look.
Will Chancellor act to close loop hole?
The question remains that if the Chancellor sees that landlords are side stepping the latest changes then will he legislate again to restrict the opportunities of landlords have to avoid the latest tax increase. Recent experience has shown that the Chancellor is not scared to act against landlords to raise more tax.
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