In a recent report from Countrywide, one in five let properties are now owned by landlords through a limited company rather than owned privately which is a record high in the first quarter of 2017.  In London this figure stood at one in four.

According to the report the increase is likely being driven by the tapering of mortgage tax relief which took effect on the 6th April.  Prior to the 6th April, landlords could claim tax relief on their mortgage interest payments; however by 2020 this will be reduced to a 20% rate of mortgage tax relief.

Most affected by the changes are likely to be landlords who carry large mortgages on their rental property portfolios.   However, it is possible for a landlord to be better off owning property through a company rather than as a personal asset as companies are generally taxed more favourably.  But landlords need to be aware that although the tax may be more favourable, any transfer of property into a limited company is viewed as a sale by HMRC and would be subject to capital gains tax. Therefore it will be important for landlords to seek expert advice to plan for the future.

As the tapering of the tax relief rate is introduced over the next few years it will be interesting to see if there is a drive by landlords towards limited companies.

Are you planning to move your invests into a limited company?

How is the change to mortgage relief affecting your decision making towards investment property?

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