New research has revealed that an increasing number of landlords are opting to invest in property through the use of limited companies, rather than as private individuals.
According to the lender, Precise Mortgages, more than a third of investors (38 per cent) plan to use limited companies to purchase properties this year. Meanwhile, 28 per cent plan to do so as a private individual. A further eight per cent already operate as a Limited Company and an additional 10 per cent are considering doing so in the future, while the remaining 16 per cent said they were undecided on what action to take.
The research found a sizeable difference in the approach of landlords with three properties or fewer and those with four or more.
Amongst the former group 31 per cent indicated that they planned to use a limited company, while 42 per cent of the latter group planned on using a limited company.
Alan Cleary, Managing Director of Precise Mortgages, said; “Buying property within a limited company structure has become increasingly popular, particularly among larger professional landlords.
“Given the predicted rise in landlords switching to limited company status this year, we can expect this trend to continue.”
Landlords seeking to create a limited company through which they manage their portfolio should be aware that whilst it may improve their position in regards to tax relief on mortgage interest, they could find themselves incurring new Corporation Tax charges on any profits they make.
It is therefore recommended that you seek professional advice before setting up a limited company. If you would like assistance forming a limited company and would like to know what impact it may have on your tax affairs, please contact us.