Happy Tax Day, BUT NOT FOR ALL

Happy Tax Day, BUT NOT FOR ALL

0:01 AM, 31st January 2022, About 4 months ago

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If you are a private (unincorporated) landlord, 31st January 2022 was the last day to pay your tax on your rental profits for the 2020/21 tax year without incurring penalty interest.

Were you shocked at your tax bill this year?

Below is an example of a private rental business owner who consulted us last Summer. As you will see, there is a comparison showing the amount of tax they will pay today vs the amount they would have paid if they had incorporated their business sooner.

The tax position is actually twice as bad as the image shows above, because these figures apply to both the husband and wife.

Thankfully, these landlords will not be in the same position next year, because they have now incorporated their business. However, Income Tax was NOT their only reason for incorporation.

They can now sell some of their lesser performing rental properties without incurring tax on their Capital Gains up to the point of incorporation. This will leave significantly more money in the pot for investment into new projects.

They also incorporated their business into a ‘SmartCo’ structure, meaning that any future capital growth will accrue outside of their estate and will not be subjected to inheritance tax.

They wated a structure that satisfied their business continuity plans and ring fenced the risks of doing business as landlords from their other businesses, investments and personal assets.

Further good news

Whilst their business had never been registered with HMRC, they met the criteria of the Partnership Act 1890. This meant they had no Stamp Duty or incorporation tax to pay at the point of incorporation. Furthermore, as a result of utilising the “Substantial Incorporation Structure” they didn’t need to refinance either.

We cannot turn back the hands of time, but we can help you to solve your future tax problems by recommending and helping you to implement the optimal ownership structure for your property rental business, so please get in touch.

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  • For the avoidance of doubt, we are able to assist landlords who own properties in England, Northern Ireland, Scotland and Wales. Where you reside is not a problem, even if you are resident outside the UK.
  • Landlord Tax Planning Consultancy is the core business activity of Property118 Limited (in association with Cotswold Barristers).


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