Incorporation Feasibility Analysis For Landlords

Incorporation Feasibility Analysis For Landlords

11:45 AM, 14th July 2023, About 11 months ago

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10’s if not 100’s of thousands of landlords still haven’t incorporated their rental property business or even taken specialist advice on the feasibility of doing so.

We struggle to understand this given that we offer a service to consider feasibility for a fixed fee of just £400. Many are at least contemplating restructuring their rental property businesses by selling some or all of their properties whilst others are actively doing so.

CGT alone is a good reason to incorporate for unincorporated landlords to at least consider incorporation. The reason for this is that historic capital gains are washed out of properties and into the shares of the acquiring company at incorporation, leaving little or no CGT to pay at the point of sale. Why? Post incorporation, if the company sells properties it will then only pay corporation tax on any growth in the value of the properties from the day it acquired them at market value as part of the incorporation.

Many people incorrectly believe the only reason to consider incorporation is to solve the Section 24 problem. This can indeed be one of the tax-related benefits, but there are many more benefits which are common business sense. For example, separation of litigation risks from personal wealth such as one’s home and savings, business continuity and legacy planning. Another good reason to consider incorporation is that lenders are far more generous in terms of their affordability criteria when considering Limited Company lending. This has become extremely important now that interest rates have risen so considerably.

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