Transferring a property, or properties, from individuals to a company has increased in popularity recently. Having both pros and cons to the new structure, it is important to ensure the change is right for you. With this in mind, we have set out the pros and cons of it.
- If you are looking to buy another property to live in and rent out your current property then if you keep your current property in your individual names, you will pay the higher rate of Stamp Duty Land Tax on the new purchase.
- The loss of mortgage interest relief for individual buy-to-lets has made company buy-to-let (where this relief remains) popular.
- Paying Corporation Tax(currently at 19%) rather than Income Tax (currently 20% at the Basic Rate or 40% at the Higher Rate); especially when you are a Higher Rate Tax Payer.
- Other tax planning.
- Depending on your circumstances, you may have to pay Stamp Duty Land Tax.
- There is an annual tax on enveloped dwellings that are put into a corporate structure. However, annual tax only applies for properties over £500,00 and it goes up in stages from there.
Depending on how much the property is worth it can be a lot of tax, but there is an exemption if it is let out at an arm’s length transaction.
- It’s likely that you may need to refinance and therefore consider early repayments on your mortgage as you’re holding property in a personal capacity.
If you are refinancing, the timeline will depend on how many properties you are transferring. If you are wanting to transfer a large number, it could take months. This is because it usually takes a while to complete lender requirements. However, if there are no mortgages involved then it can be completed in a couple of weeks.
Overall, transferring a property into a company can be beneficial if you want to restructure your business but it’s always a good idea to check everything with your accountant at the same time as gaining legal support and advice.
Attwells Solicitors have a wealth of experience transferring multiple properties in a portfolio and are based in London, Colchester, and Ipswich.
To get started with your property transfer, call our team on 01473 229 200.