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In his Autumn Statement last year the Chancellor again announced extra taxes for anyone with buy-to-let property.  Corporate landlords didn’t suffer so if you’ve already been thinking about incorporating your property rental business now might be a good time to consider this.

the proposals

Here’s a brief summary of Mr Osborne’s proposed changes:

  • higher rate tax relief on loans to landlords for buying or improving residential property which is let will be phased out.  Taking place over three years, this process will begin on 6 April 2017
  • an additional 3% stamp duty land tax (SDLT) will be introduced on 1 April 2016 on the purchase of second homes and other residential property.

corporate ownership

Companies borrowing to buy rental property won’t pay any additional tax but they may have to find additional SDLT.  Exactly how these changes will be applied is yet to be finalised as the government intends to consult on this early this year.  It has already said though that companies will only escape the extra SDLT if the property is let before it’s sold again.

the pros and cons

There’s lots to consider when looking at whether incorporation will save you money, including:

  • capital gains tax (CGT) on transferring a property if its value has increased since it was purchased, although this may be deferred in some cases if you own and manage a number of properties
  • CGT on a property sale could be higher or lower under corporate ownership
  • your total income, as well as your profit on rental properties will mean that you may or may not save tax because of the loss of higher rate tax relief on loan interest.

If you’re interested in looking at the benefits of incorporation, please do get in touch on 01782 279615.  We’ll be very happy to look at the potential savings for you.  However the tax position is not 100% clear at the moment so if cutting your tax bill is your main reason for considering incorporating it may be best to leave things as they are for now.