Property Tax Planning

Should I transfer my residential rental properties into a limited company?

This is a question that many landlords will have asked themselves following the introduction of the finance charge relief restrictions in recent years.

In a bid to boost the housing market, the stamp duty land tax (SDLT) nil rate band has been increased for all property purchases up to £500,000 in England, Wales, and Northern Ireland.  A saving of up to £15,000.

Likewise, the Scottish Government have announced a Land & Buildings Transaction Tax (LBTT) increase in the nil rate band so that anyone buying a home in Scotland under £250,000 will not pay any LBTT. A saving of up to £2,100.

The measures for both SDLT and LBTT will be in place until 31 March 2021.  For those considering putting residential property into a company, it could reduce the SDLT/LBTT payable if this is done by 31 March next year.  With both SDLT and LBTT the additional supplement for second homes can still apply as can reliefs for multiple dwellings all of which should be looked at on a case by case basis.

The other main tax to consider on putting property into a company is capital gains tax (CGT).  Due to the pandemic, property values in some parts of the country are temporarily depressed, which could also make it a good time to put the property into a company with less CGT payable.

While there are several tax implications to consider such as capital gains tax, inheritance tax and corporation tax; there are also several non-tax implications which may impact incorporation.

These non-tax implications can include rearranging finance on the properties with lenders; liaising with solicitors or rental agents to rewrite existing rental agreements and potential succession planning.

This can be a complex area with many variables to consider, if it is something you would like advice on, our tax team would be happy to help. Please get in touch with David Mcindoe.