Now may be the time for buy to let investors to consider incorporation – putting their property portfolios into a limited company.
That’s the view of a property tax expert at accountancy firm MJ Bushell, who says the government’s stamp duty holiday on properties costing up to £500,000 – introduced last month and lasting until 2021 – has added momentum to the question.
Matt Warwick, in a blog on the company’s website, says: “Over the last few years this question has arisen more and more frequently, especially after the government introduced the mortgage interest restriction for buy to let properties.”
He continues: “In most circumstances the initial outlay in both capital gains tax and stamp duty meant the transfer wasn’t feasible although this new SDLT threshold, along with a general drop in houses prices, may well change all that.”
Warwick suggests that while landlords buying additional properties still face a three per cent SDLT surcharge on their purchases, they are not required to pay the standard rate of SDLT on top for homes valued £500,000 or less.
And he adds: “This also applies to the transfer of properties into a business, which would normally attract a substantial SDLT bill. In fact, the savings could mean they pay up to half as much.”
He says that for individuals looking to establish a buy to let portfolio, the company structure “works fantastically well” and it allows existing properties to be transferred across at a much lower cost – although he insists that each investor’s personal circumstances will have a bearing on whether the option is right for them.
This post has originally been featured in Letting Agent Today.