Posted on 7 September 2016 by
If you're starting to feel the pinch in the buy to let market and have concerns ahead of the proposed changes to lending affordability and the additional tax changes coming into force in 2017, now could be the time to consider limited company buy to lets.
Setting up your buy to let investment in a limited company allows you to benefit from advantageous tax rates that can be lower than high-rate income tax and capital gains tax rates which could apply if property is held in your personal name. Those who hold property in limited companies will also be unaffected by the tax relief changes coming into force in 2017, meaning that buy to let lenders may continue to offer lower rent stress tests and improved lending affordability to such landlords.
Whether you're an established buy to let investor or just starting out and considering investing through a limited company, it's important that you seek tax, legal and mortgage advice from the outset. This knowledge will help you understand the potential advantages and disadvantages associated with company ownership as well as the additional responsibilities you'll be taking on.
The decision as to whether a company should be used to hold property will essentially depend on your future intentions. As with any financial decision, suitability is dependent on a number of individual factors, from your goals, financial situation, current rates and the availability of mortgage finance to Limited Companies. There are many things to think about if you’re looking to move from personal name to limited company and many possible advantages and disadvantages that you’ll need to consider.
If you don't yet own any buy to let properties it's simpler to start the process with a Limited Company than if you're an investor transferring existing property. However, before deciding to proceed you should seek independent advice from tax, legal and mortgage specialists.
If you are transferring property from your personal name to a Limited Company you are likely to be liable for Capital Gains Tax and Stamp Duty Land Tax (SDLT) on the transfer, so it's important to understand if the overall benefits outweigh the costs. It is therefore important that you speak with an accountant or tax adviser before undertaking this type of transfer.
What you plan to do with your buy to let investment will impact this decision so it's important for you to outline what you ambitions are. Do you want to downsize or grown your portfolio? If it's the latter then doing so via a Limited Company structure, if you're willing to pay these one off costs, it could possibly be worth it in the long run.
Categories: Buy to let
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