If you are a landlord or a property investor, then you may want to consider setting up a Property Limited Company. More people are taking this approach because there are several reasons which make this more beneficial in the long run.

This article explains why you may consider setting up a property Limited Company and the benefits.

If you own buy-to-let properties, then you will have to pay tax based on the rental income that you receive. This income is added to any personal income (from employment or if you run a business) and this could potentially push you up to the threshold, which means that you are in the higher tax band.

However, if you manage your properties through a Limited Company, then you would be liable for paying Corporation Tax, and this is not affected by your personal income.

So, for the Current tax year 6 April 2019 to 5 April 2020

The higher rate tax band is 40%

Whereas the current rate for Corporation Tax is 19%

So, as you can see, you could reduce your tax liabilities by setting up a property limited company.

More benefits of setting up a limited company

It was worth talking to your accountant to check which approach is best for you. Here are some more benefits to consider and help you make an informed decision.

1. If you are a property investor and your main aim is to buy a property, refurbish it and then sell then, it would be financially better to be a Limited Company. You will pay corporation tax on any profits made.
2. If you own buy-to-let properties and you are building up profit from your rental income, you can time your dividend pay-outs for tax efficiency. Plus, you have the option to pay dividends to family members or live the profit in the company to use in the future for purchasing more properties.
3. From April 2020, you will not be able to claim mortgage interest as an allowable expense if you are investing in property as an individual. However, this will be an allowable expense for limited companies.
4. There are more opportunities to mitigate inheritance tax if you are operating as a limited company.

One of the reasons people often cited for not operating as a limited company was that the choice of lenders for a mortgage was limited. However, this is no longer the case. If you use an experienced mortgage advisor, they should be able to find you the best deals.

Setting up a limited company is straightforward, but it is worth talking through the pros and cons of your situation first. If you would like any advice please do not hesitate to contact us.

You can call 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it..