Posts with tag: ltd company

Over 40% of landlords are looking into making their business a ltd company, according to new research from the National Landlords Association (NLA.)

Presently, just only 1% of respondents said that they had already chosen to incorporate. The NLA believe this is due to the high cost of transferring personally held property into a private limited company.

Intentions

Additionally, data shows 31% of landlords have no intention of switching their properties to a limited company. 29% are still not sure about what they are going to choose in regards to incorporation.

Mortgage interest relief for buy-to-let landlords is to be levelled at the basic rate of income tax (20%) by 2021 and will begin to be phased back from April 2017. Landlords then will no longer be able to remove the cost of mortgage interest before they declare their taxable profit. The new moves will see them receive a tax credit of 20% of their mortgage interest costs.

The NLA has called the alterations, ‘The Turnover Tax,’ as landlords’ tax will be worked out on the rental income they earn instead of any profits. and will drive many basic rate payers up into a higher tax bracket. Higher rate payers will be left with increased bills.

Transferring

Landlords structured as private limited companies will be exempt from the tax alterations. Instead, they will only pay corporation tax on their profits.

‘Transferring personally held property to a limited company isn’t a straightforward process, so it’s not surprising that so few have taken this action so far,’ noted Richard Lambert, Chief Executive Officer at the NLA. ‘Landlords need to do their research but many will realise that incorporating simply doesn’t stack up financially; doing so will incur capital gains and potential stamp duty charges, which means the process may be prohibitively expensive.’[1]

Richard Price, Executive Director of the UK Association of Letting Agents, also noted, ‘while just one per cent have incorporated so far a significant proportion are still considering the move. If landlords follow through with these intentions then it’s likely that more and more will take a hands-on approach to managing their portfolios in the future, which would mean less business to go around for agents and certainly less of a need for full service offerings.’[1]

‘The changes to taxation are forcing landlords to re-evaluate their business and their place in the market, so our advice for agents is to begin talking to your clients about their intentions over the next few years and consider how you’ll meet their changing needs in a way that is distinct from your rivals,’ Price concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/incorporating-doesnt-stack-up-for-majority-of-landlords.html