Property Incorporation is the process of transferring interest in a property from a single name or
partnership into a limited company, by assessing your property portfolio we can help to structure
these correctly which can potentially result in significant tax savings.
What is an
Incorporation is the process of transferring ownership of a property or portfolio of properties from a single name or joint names to a limited company.
From 6 April 2020, a buy-to-let landlord can no longer claim mortgage interest as a deductible expense when calculating their profits subject to Income Tax. As a result, for a Higher Rate and Additional Rate taxpayers that have mortgage debt, they have seen their Income Tax bills rise significantly.
This change in law does not apply to companies, which is why many buy-to-let landlords are now incorporating their property portfolios.
What are the Benefits?
The benefits of transferring from a buy to let portfolio to a limited company include:
A company is taxed on profits at Corporate Tax rates, which are less than Income Tax rates for Higher Rate and Additional Rate taxpayers
Profits can be taken in the form of salaries or dividends and extracted more tax efficiently through the use of different share classes
There is an immediate uplift in the base cost of properties transferred to a company, so they can be sold in future with a reduced tax charge
Personal protection afforded by a corporate structure such as Limited Liability
In most cases, a corporate structure is a better platform to start planning for business continuity and Inheritance Tax protection
Tax on Incorporating
The transfer of property to a company will be a capital disposal for Capital Gains Tax (CGT) purposes and could give rise to a CGT charge. For portfolio transfers, a CGT relief claim can be applied and if all the appropriate conditions are met avoid a CGT charge arising.
A SDLT charge would also normally apply to the transfer of the properties to the company at market value. However, in certain circumstances relief claims can be applied to either reduce the SDLT charge and in some cases no SDLT charge is applicable.
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Are You Eligible?
There are six simple questions you can ask yourself to find out if you would benefit from incorporating your portfolio and whether you can do so without triggering SDLT/CGT charges.
Are you a higher or additional rate taxpayer?
Are you a married couple or have an existing property investment partnership?
Do you own in excess of 4 or more properties/units?
Do you spend a significant amount of time managing the portfolio?
Does your portfolio consist of mainly residential properties?
Do you have mortgage debt?
Our Range of Services
We’re well positioned to help with any of your tax enquiries, call or email the team to find out more.
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