If you are thinking of becoming a landlord this may be a useful read. Over the past two years solicitors working in Attwells’ niche, the commercial property law department has seen an increase in landlords transferring buy-to-let properties from their personal names into companies. This has been due to changes to individual tax rates and exemptions which tend to be favoured by landlords looking to start a portfolio or those who accidentally became landlords.

Transferring rented property into a company

In one scenario, a landlord who has transferred their existing properties they own in their personal name to a company would be able to purchase another property in their personal name and be exempt from paying the higher rates of Stamp Duty Land Tax (SDLT).

The high rate SDLT is payable for people who own multiple properties in their personal names. This is currently set at 8%, for a property costing between £250,000 to £925,000 which is worth noting as the average Colchester house price was over £322,000 according to Zoopla. Whereas buying as an individual you would pay 5% for the same criteria.

Corporation Tax for Landlords

Other tax benefits also include the payment of Corporation Tax as opposed to Income Tax on the company’s profits. While there are no tax allowances, expenses and deductions can be claimed to reduce the tax owned, such as repairs or the cost of maintenance. Additionally, any equity in the properties transferred to the company could be treated as a director’s loan meaning the directors who loaned the money can withdraw profits as repayment of the loan tax-free rather than as dividend which would otherwise have been subject to income tax.

Paying Corporation Tax on your rental earnings could result in you paying 21% less tax depending on your income. In addition, you can claim mortgage interest relief for a company buy-to-let which is no longer available for individuals.

The current rental market is buoyant, with Rightmove reporting an increase in demand for rental properties across the UK of 39% with urban apartments being the most sought after.

There is further good news for Colchester landlords with the average rental in the East of England being £1,289 per month according to Rightmove. This is up by 8.2% from last year.

Phillip Hewett, Commercial Property solicitor comments; “I have dealt with a number of transferring residential portfolios from individuals into companies. From a single property with no refinancing up to a 15-property strong portfolio with refinancing; I know how much stress this can cause (especially where there are a lot of properties and multiple loans) but we are here to navigate you through the process.”

Attwells Solicitors have a wealth of experience transferring multiple properties in a portfolio. 

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