In the summer 2015 budget the chancellor announced plans of a number of direct attacks on private landlords.
However this was not the whole picture as the introduction of other changes later or separately shows us the government’s intention and determination to remove what they see as “Accidental Landlords”, these are the individuals who have acquired few properties over the years and their portfolio is not large enough to be classified as a business.
Moving forward HMRC would want to see more “professional Landlords”, these are landlords that use a limited company as a vehicle to run their property portfolio, this would provide a more stringent reporting on the income & Profits from the property business.
In the 2016 budget the chancellor announced a reduction on capital gains tax on most assets, dropping from 18% and 28% to 10% and 20% however residential properties remain at the previous levels.
The introduction of High Income Child Benefit Charge which was another tactic to claw back child benefit from families where any individual has earnings over £50,000.
And then the removal of the 10% wear and tear allowance from tax year 2016/17.
Also taking into account that Basic Rate tax band was reduced from 2010/11 level of £37,400 to 2015/16 level of £31,785 pushing more people into the higher rate and although the basic rate band had increased slowly since 2015/16 it is currently only at £34,500 for the 2018/19 tax year.
At first glance when we consider the points above it appears that running a property company is very attractive especially when we take into account the lower tax on profits and the better relief for interest and losses. However there are draw backs that need to be carefully considered.
The advantages to using a limited company;
The disadvantages of using a limited company;
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Capital Gains Tax on Incorporation of a Property Rental Business
Have you overpaid Stamp Duty Land Tax (SDLT)?
Other Implications of Property Business Incorporation
SDLT on Property Partnership Incorporation
Income Tax for Non-residents investing in the UK residential property
Advantages & disadvantages of using a company for buy to let investments
Qualifying Loan Interest
The Ramsey Case, would your property portfolio qualify as a business?
Joint Property Ownership