Rush in Landlords setting up property companies before new taxes hit
The tax man is making it harder for landlords to make a profit with new taxes hitting from next month in April with the introduction of an extra 3% stamp duty tax on anyone who owns more than 1 property.
Also the introduction of a new tax restricting landlords offsetting mortgage interest costs against income is being rolled from next year. This will have a major impact on the financial return of many buy-to-let investments.
However Landlords are fighting back by setting up property companies. If property is held withing a companies the new tax law does not apply.
A study of Companies House and Office for National Statistics data by The Telegraph indicates that more than 4,560 property companies have been incorporated in the past three months alone. This is a rise of 50% compared to the same 3 months last year and is expected to rise as landlords realise the impact of future tax changes.
However it is not a simple as setting up a company to bypass this new tax as landlords will have other costs such as accounting fees, extra mortgage costs and corporation tax, tax on dividends and salary. These extra costs may be more than accepting the tax and landlords need to research and review their investments.