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Transferring property from personal ownership into a limited company is an increasingly popular strategy for landlords in the UK. Whether you own a single buy-to-let or a large portfolio, operating through a Special Purpose Vehicle (SPV) can provide tax benefits, asset protection, and long-term financial advantages.
However, this process comes with key considerations, including Stamp Duty Land Tax (SDLT), Capital Gains Tax (CGT), and mortgage refinancing. In this article, we’ll explore:
Lower Corporation Tax: Limited companies pay Corporation Tax (currently 25%) instead of higher personal income tax rates (up to 45%).
Full Mortgage Interest Deduction: Unlike personal ownership, all mortgage interest can be deducted from profits.
Retaining Profits for Growth: Companies can reinvest rental income into new properties without personal income tax exposure.
Limited Liability: Personal assets are protected, as the company, not the individual, is responsible for liabilities.
Easier to Transfer Ownership: Shares in a company can be passed to family members, simplifying inheritance tax planning.
Better Long-Term Borrowing Options: Some lenders offer better deals to companies than to individual landlords.
Access to Higher Loan Amounts: Rental income calculations for limited companies are often more generous, enabling larger mortgages.
Transferring property into a limited company is not as simple as just changing ownership. The process involves selling the property to the company, which triggers SDLT, CGT, and mortgage refinancing.
Register a Special Purpose Vehicle (SPV) through Companies House (Recommended SIC Code: 68209 – Letting and operating of own real estate).
Open a business bank account to manage rental income and expenses.
The limited company purchases the property from you at market value, as determined by an independent valuation.
A solicitor manages the transfer and ensures compliance with tax regulations.
tamp Duty Land Tax (SDLT): The company must pay SDLT based on the purchase price, including the 5% surcharge for additional properties.
Capital Gains Tax (CGT): If the property has appreciated in value, you may owe CGT (up to 28%) on the gain.
The company must take out a new mortgage, as existing personal mortgages cannot simply be transferred.
Many specialist lenders now cater to limited company landlords, offering up to 75% LTV mortgages.
The company collects rent, pays expenses, and retains profits for reinvestment or shareholder dividends.
Background: Mark owned five buy-to-let properties in his personal name, generating £100,000 in rental income.
Challenge: His tax bill was high due to the mortgage interest relief restriction.
Solution: He transferred all properties into an SPV and secured limited company mortgages.
Outcome: He now benefits from full mortgage interest deductions, reducing taxable profits and allowing him to reinvest savings into new properties.
Background: Sarah and her husband owned three rental properties and wanted to pass them to their children.
Challenge: If they left the properties in their names, their children would face 40% inheritance tax (IHT).
Solution: They transferred the properties into a family-run limited company, gradually gifting shares to their children.
Outcome: The portfolio remains within the family, and inheritance tax exposure is significantly reduced.
Transferring property into a limited company can be a tax-efficient strategy for landlords looking to expand their portfolios, reduce tax liabilities, and protect their assets.
However, this process involves SDLT, CGT, and mortgage refinancing, so careful planning is essential. If you are a high-rate taxpayer or planning long-term investment, incorporating could significantly improve your profitability.
Before making a decision, consult with a tax specialist, mortgage broker, and solicitor to understand the financial implications.
A: It depends on your goals. If you plan to grow a portfolio, the tax savings and reinvestment potential make it worthwhile. However, consider SDLT, CGT, and mortgage costs before deciding.
A: No, SDLT is payable unless the company is a partnership that has existed for at least three years before the transfer.
A: No, a buy-to-let SPV is for rental purposes only. If you live in the property, it could create tax complications.
A: No, you must apply for a new mortgage, as personal mortgages cannot be transferred. However, many lenders offer 75% LTV mortgages for SPVs.
A: You can withdraw profits as dividends (subject to dividend tax) or as a salary. Consult an accountant for the most tax-efficient strategy.
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