The number of buy-to-let portfolios which are changing hands has surged sixfold in an attempt by England’s top landlords attempt to escape the UK Government’s tax crackdown.
” There are several reasons why investors should consider trading buy-to-lets in a limited company rather than as an individual:
1. Previously all landlords could offset their mortgage interest payments against tax. Since April 2020 they have only got a 20% tax credit. All interest is obtained in a company structure.
2. Corporation tax is 19% as opposed to 40% income tax at the higher rate.
3. Stamp duty for individuals can be enormous. 3% additional homes surcharge on additional properties can be substantial. Buying shares of an existing property company comes with only 0.5% charge on purchase price is far better.”
There is a serious danger that some buy-to-let portfolios which are not incorporated could actually be losing money because:
- There has been a sharp increase in interest rates which is not a allowable expense.
- Projected falls in the value of property prices.