To avoid new tax legislation
In light of the announcement to reduce the tax relief available for landlords from April 2017, 5% of landlords, in a participating survey, have already converted to trade as a limited company. 41% of other landlords were considering the move in the near future.
Moving to a limited company structure
Whilst maintaining a limited company can be more costly and complex than operating a property portfolio as a sole trader, landlords are considering it as a means to maximise their tax relief following a change in legislation coming into force from April 2017.
Higher-rate and top-rate tax payers will only be able to claim back basic-rate tax relief, currently at 20%, from April 2020, with cuts being made on a phased approach from April 2017.
This will affect thousands of UK landlords who fall into the higher rate tax brackets and subsequently already 5% of landlords have transferred to a limited company structure to prepare and avoid having their tax relief cut, according to a survey by Paragon Mortgages.
The survey also showed that of the 1,400 participants, 41% of landlords were considering a change in trading structure. This increased to 63% for landlords with larger portfolios with more than 20 properties.
Read more – Running a buy-to-let through a limited company
How much will recent SDLT and tax relief changes affect landlords?
Tenant demand and average yields remain strong, according to Paragon, so while the government are doing what they can to detract from “over-heating” in the buy-to-let property market, it seems that there are conflicting dynamics at play.
However, 43% of landlords surveyed reported that the SDLT surcharge would impact their buying decisions. 63% of those with 20 properties or more suggested the same.
Dental & Medical Financial Services can provide advice on the tax regulations regarding buy-to-let and put you in contact with a specialist accountant who can help you with the rest.
Tel: 01403 780 770