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Should you incorporate your buy-to-let business?

Should you incorporate your buy-to-let business?

If you are currently a landlord or considering becoming one, you may already be aware of the recent changes in the buy-to-let sector. With a now much less generous tax system in operation when personally buying property and letting it out, many landlords are considering incorporating their buy-to-let businesses.

Essentially, it means your properties would belong to your company instead of you personally. This is a big decision for any investor to make so please make sure you talk to an understanding and experienced colleague here at Kelsall Steele before proceeding.

We can then help you decide if incorporating is the right decision for you and how to go about it.

What is wrong with the old system?

It’s no secret that the government has had a very public change of heart regarding buy-to-let investors. Where decades’ worth of effort and initiatives went into fuelling the sector, new rules and regulations are a clear sign that attitudes have changed.

Buying a property that will not be your primary residence now carries an additional £7,000 extra in tax on the average-priced UK home. The new 3% hike in stamp duty means many investors are now having to find more actual cash than ever before for their new investment properties.

You can no longer deduct your mortgage interest before arriving at your profit figure when paying your tax, and the automatic 10% wear and tear allowance is a thing of the past.

If you choose to sell your buy-to-let property, you’ll soon no longer be able to wait until your next self-assessment date to pay the capital gains tax. As of April 2019, you’ll be liable to pay it within just 30 days of the sale.

The hike in stamp duty means that building your portfolio costs you considerably more and the new rules on rental income make turning a profit much more difficult. Against this backdrop, many landlords are looking for alternative options.

Incorporating your business

Evidence suggests that the landlords are moving en masse to incorporation.

According to the UK’s largest estate agency group, Countrywide, a record high 20% of all rented homes in the first quarter of 2017 were owned by companies rather than individual landlords. Data from MoneyFacts suggested that the number of buy to let mortgages available to limited company borrowers had increased by 10% in the year since last April.


When you hold properties personally, you may have to pay as much as 45% on your profits, however as a limited company, you’ll pay corporation tax instead which applies at just 19%.

You’ll also get to choose whether you receive income from your limited business as dividends. You have a £5,000 personal allowance this tax year which will reduce to £2,000 from 2018/19.

If you have a very large portfolio, the market value of your shares in your incorporated property business could greatly increase when you pass away. However, if you owned the properties personally, you won’t be able to benefit from Business Property Relief and your loved ones could be left with a large inheritance tax bill.

Are there any drawbacks?


When you incorporate your buy to let business into a limited company, you essentially sell your property portfolio to your company. In HMRC’s eyes, two transactions per property are taking place.

On the sale of a property from you to your company, if you’re a basic rate tax payer, you’ll have to pay 18% of your profits in capital gains. As a higher or additional tax payer, you’ll be liable to hand over 28%.

As your company is buying the home from you, it will be charged the enhanced stamp duty rate.

If you have 10 properties you wish to transfer, that’s 10 lots of capital gains tax and 10 lots of the increased rate of stamp duty land tax. Depending on your personal situation, you may have to have a significant amount of cash available to perform your incorporation.

If any of the properties in your portfolio are of particularly high value, worth £500,000 or more, you’ll also have to pay an annual charge on ownership (as well as domestic rates when the house is unoccupied). Properties between £500,001 and £1,000,000 carry a charge of £3,500 a year in tax. Anything between £2m and £5m will cost you as much as £23,550.

This charge does not apply to personally held properties. Click here to read HMRC’s regulations on annual tax on enveloped dwellings.

Incorporating your buy-to-let business – talk to our team

Depending on the value and size of your portfolio, incorporating needs careful planning not just for capital gains tax and stamp duty considerations – this brings up inheritance tax issues too. Please call us on 01872 271 655 or email enquiries@kelsallsteele.co.uk

Keys and Tenancy Agreement

HMRC Let Property Campaign

Let Property Campaign

Following on from the Property Sales Campaign which HMRC ran in the summer (as well as numerous other campaigns in recent years) HMRC are now targeting landlords with their Let Property Campaign.

This campaign targets landlords who have not paid the correct amount of tax, allowing for them to bring their affairs up to date under the most favourable terms. The Let Property Campaign is aimed at individuals rather than companies or trusts and will include landlords who are:


  • Renting out a single property
  • Renting out multiple properties
  • Specialist landlords, e.g. student or workforce rentals
  • Renting out a room in your main home for more than £4,250 a year or £2,125 a year if letting the property jointly, i.e. above the Rent a Room Scheme threshold
  • Living abroad and renting out a property in the UK
  • Living in the UK and renting a property abroad
  • Renting out a holiday home even if you use it yourself

As with other campaigns, using this facility does not guarantee that you will not be penalised but HMRC do say that they will view individuals in the most favourable light.

How to take part

The first step is to notify HMRC of your intention to make a disclosure under the campaign. This can be done by completion of the Let Property Campaign Notification form, which can be submitted via the Internet or post. Alternatively, you can telephone the Let Property Campaign helpline on 03000 514 479  indicating that you wish to take part in the scheme.

You will need to follow up with a calculation of tax owed to HMRC within 3 months of the notification, along with the disclosure form. The calculation will need to cover the previous 6 tax years unless there has been a deliberate error.

If you believe the Let Property Campaign may apply to you and would like assistance with making the disclosure then please contact Clare Vaughan on 01872 271655 or by email on clare.vaughan@kelsallsteele.co.uk.