Home ~ News ~ Legalities ~ Story #29978 ~ 28 Sep 2021 ~ Rita Horne

Company setup for buy-to-let landlords

I hear a lot from my clients and fellow landlords about LTD companies and whether one should set up a company for the purpose of buying properties to let…

Firstly, may I say that I am a property manager and landlord, not an accountant. Bearing in mind, also, that everyone’s circumstances are different so I do advise anyone considering to setup a company to buy for let property to first seek advice from a qualified practitioner.

The pros and cons:

The pros

At this moment in time corporation tax rates are less than individual tax rates especially if you are a high earner. There are also other tax benefits like being able to transfer properties between companies without paying stamp duty.

Limited companies also take on limited liabilities if something goes wrong.

I guess the main advantage is that you can avoid the restrictions on buy-to-let mortgage interest.

The cons

There is more paperwork, for sure, bookkeeping, filling accounts correctly and on time and accountancy fees.

It can be harder to get a buy-to-let mortgage although recently this is becoming a little easier.

For me, the biggest issue, and what most seem to forget, is the fairly hefty capital gains tax you need to pay if you sell one of your own properties to the new company…

In conclusion, yes, it can be a good idea to seup a limited company, especially if you are a high earner and are buying new properties. However, if you have owned your properties for many years and have a considerable amount of equity built up in them already, then, it’s not such a good idea. Don’t forget about the size of your mortgage. If your repayments are not so large then what are you really saving?

Below I have added some interesting references to Limited liability partnerships. Definitely worth a look too:

unbiased.co.uk/news/property/landlord-ltd-is-this-how-to-beat-the-buy-to-let-squeeze

unbiased.co.uk/news/financial-adviser/three-ways-to-cope-with-losing-buy-to-let-tax-relief

property118.com/tax/beneficial-interest-transfer-agreement

theaccountancy.co.uk/limited-company/whats-difference-llp-limited-company-7698.html

property118.com/tax/beneficial-interest-transfer-agreement

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