8 May 2019
The Residential Landlords Association recently revealed that a quarter of all landlords are planning to reduce the size of their buy-to-let portfolio in the next 12 months. Recent tax changes originally introduced by George Osborne and expanded upon by Philip Hammond, have reduced the profitability of rental businesses. So it is not surprising that many landlords are now weighing up their options. Whilst some are considering getting out of the rental business entirely, others are reconsidering their ownership structure, finance deals and how they will develop their portfolio in the future. Many landlords have started to use company structures to shield themselves from costly tax reforms.
For many landlords, incorporating their existing portfolios into a limited company may be the best route for them. This should be considered on a case-by-case basis taking all factors into account.
There’s no doubt that the stamp duty hike and tapering of mortgage interest tax relief have made it more challenging to build up a property portfolio. The additional 3% stamp duty charge adds a hefty upfront cost to property acquisition, which is putting a strain on landlords who want to expand their portfolios. The other grey cloud – the squeeze on profits for personally-owned properties – will continue as higher rate tax relief on interest is phased out completely by April 2020. Buy-to-let landlords across the UK certainly have a lot to think about. Careful forward planning will help to mitigate any surprise tax bills.
If you are a buy to let landlord considering your options, speak to one of our tax experts.
For more information about the services we offer to landlords, visit our Property page here.