Incorporating Property Portfolio into a Limited Company

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Incorporating a property portfolio into a limited company with Morgan Stewart.

Can I transfer my properties into a limited company?

Transfer is the wrong word really, because a limited company is a separate legal entity to yourself. If you were to own the property in your own name, and wanted to put that property into a limited company, it’s actually classed as a sale. So that limited company will be buying the property from you.

Should I transfer my Buy to Let properties into a limited company?

Just as a disclaimer, we cannot give any tax advice, you need a regulated accountant to understand the pros and cons. Broadly, however, the reason people want to put their properties into a limited company is because of something called section 24. Section 24 was announced by George Osbourne in 2016, and if you buy properties in your own name, you cannot claim all of your finance costs against your turnover. Landlords are basically being taxed on their turnover if their property is in their personal name.

For limited companies the rules are different. If you own a property within the limited company, you can still claim a hundred percent of your finance costs against your turnover,  which if you own a lot of properties, and you are a higher rate taxpayer, could be beneficial to do that.

Moving properties into a limited company is not straightforward because it’s classed as a sale and it needs to be done at full market value from yourself. 

Can a limited company invest in residential property?

Yes, 99% of the mortgages we arrange are on Buy to Let for limited companies. After 2016 there was an explosion in products available for limited company mortgages for Buy to Lets,  so it’s a very competitive market at the moment.

What are the benefits of incorporating a property portfolio into a limited company?

Obviously this is not financial or tax advice and everybody’s circumstances are different, but the main benefits are that you can still deduct 100% of your mortgage costs against turnover on your property. You pay tax on profit instead of paying tax on turnover if you own it in your own personal name.

Everybody’s situation is different, but if you own a large amount of properties, maybe nine or ten properties, I would definitely be getting tax advice about whether it would be beneficial to put those properties within a limited company.

Do you pay Stamp Duty in this case?

If a client is looking to incorporate into a limited company then the sale is done at full market value, so you’ll have stamp duty and capital gains tax to pay. Everybody should be looking for their own tax advice, because there are ways to mitigate the tax liable.

What are the disadvantages of transferring properties into a limited company?

You’re going to trigger Stamp Duty for the company and capital gains for yourself. A good accountant can advise you on the best way to structure it and if any reliefs are available. Your accountancy fees will go up for the limited company, as it requires more work than if it were a Sole Trader and the finance will be more expensive if the properties owned are within a company rather than a personal name.

How can a Mortgage Broker like GPS Financial help?

We work with a number of tax advisors who can advise on the best way to structure a portfolio corporation, but our job is to find you the finance to help you put the deal together. We work on the advice of the tax adviser, on any relief schemes which are being used to minimise the tax liability. We’ll find you the right lender at the most suitable rate and to help you incorporate that portfolio.

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