Checklists
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PROS |
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You can still (currently) deduct the finance costs from the rental income. | |
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It can be easier to transfer shares in a limited company rather than part of the ownership of a property. | |
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You pay a lower rate of tax in the company, compared to higher and additional rates of income tax | |
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All costs and income will need to be appropriately accounted for and abide by the Companies Act 2006, which you may not do if you own property individually. | |
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Profits can be retained in the company rather than drawn as income, thereby avoiding income tax charges. | |
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There are favourable rates on sale of investment property compared with a potential 28% when selling individually owned property. There are also favourable rates for disposing of shares in a company. | |
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Indexation allowance on sale of investment property allows for the effects of inflation up to 1st January 2018. | |
CONS |
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If you have an existing portfolio, you can’t just transfer it into a company as this may trigger both stamp duty and capital gain costs as you will have been deemed to have ‘sold’ the properties to the company from your ownership. However, incorporation relief may be available to some landlords operating a company; it is essential you take expert advice. Also, if you are running a legitimate partnership, there may be grounds for stamp duty savings in the future. | |
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Mortgage availability for those investing via a limited company is improving, however, be aware company mortgages may attract a higher rate of interest than personal mortgages, so do ensure you check this with your mortgage broker. | |
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The total of the income tax on dividends and the corporation tax on the company can combine to give an overall less favourable tax bill depending on your circumstances. | |
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You will have to produce accounts according to rules and regulations laid out by the government and this may mean incurring accounting bills of £1,000 a year or more. | |
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Bank accounts will be considered ‘company accounts’ so won’t usually be free of charge | |
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Exemptions and allowances of personally owned property would be lost, eg annual exemption, personal allowances. | |
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For those who own property personally, there can be benefits when selling the property if you have lived there. This is the opposite for company-owned property, and there can be serious consequences if you live in your company-owned property. | |
