Ownership Structures

1. Property can be owned personally, as a sole or joint owner, as a partnership, or in a Trust.
2. Property can also be owned by a company, which is a separate legal entity. This is known as incorporation.
3. Personal Ownership. Taxed at income tax rates, rate depends on your other income. Accounts prepared to April 5^th under the cash basis. Section 24 applies, so tax relief on mortgage interest is restricted to a 20% Tax Reducer.
4. Company Ownership. Taxed at Corporation tax rates, 19% under £50k, 25% over. Accounts prepared under the accruals basis. You decide which year date to use. Section 24 does not apply – no restrictions on mortgage interest relief.
5. When you sell. CGT applies at 18%/28% for personally owned property. Company disposal profits are charged to Corporation tax. There will be dividend tax if you wish to extract the profits from the company.
6. Stamp Duty and LTT. See rates here. Sometimes possible to move property from a formal partnership to a company with no SDLT payable. No punitive 15% rate for properties over £500k in Wales thankfully.
7. Inheritance Tax. Typically, a property business (even Holiday Lets) will not qualify for Business Property Relief (BPR).  

WEALTH WARNING!

There are lots of companies out there who will sell you a miracle package to restructure your portfolio to minimise tax. Some are decent, some are terrible. Don’t be taken in by a salesperson who promises the perfect solution as it doesn’t exist.

For landlords who wish to keep profits in the company and are higher rate tax payers, incorporation is usually the answer. However, for others, the decision has become more marginal due to the rise in Corporation tax rates. Its important to take a holistic view of your affairs with due regards to future plans, inheritance and exit strategies. The team at Property Tax Wales can work with you to navigate the uncertainty.