Should I transfer my rental properties into a company?

Should I transfer my rental properties into a company?

In light of recent tax changes, many landlords are now wondering whether they would be better off transferring their rental properties to a limited company.

The answer, as so often in tax, will depend on particular circumstances and number crunching!

Consultants will pay income tax at 40% or 45% on the rental profit after deducting mortgage interest. However, many Consultants’ will see their tax liabilities rise significantly in future years as the rules restricting relief for interest take effect.

Broadly, from April 2017 onwards relief for interest is restricted to the basic rate, phased in over 4 years.

The current rate of corporation tax is 20% and this will fall to 17% from April 2020. Furthermore, there are no restrictions on interest payable for a company in these circumstances.

If the rental profits are not needed to fund day to day living and can be retained within the company to fund the property business, there could be some significant tax savings to be made.

Consideration must be given to potential Capital Gains Tax and Stamp Duty Land Tax implications.

If it is desirable to hold the properties personally it still may be possible to utilise the lower company tax rates by using a property management company.

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