Why so many landlords have waited until now to incorporate their property rental businesses

There are several reasons why some landlords may have waited until now to incorporate their property rental businesses:

1 - Changes to tax laws: In recent years, there have been changes to the tax laws that have made it less advantageous for individual landlords to operate as sole traders. For example, the reduction of the tax-free personal allowance and the introduction of the Section 24 mortgage interest relief changes mean that many landlords face higher tax bills, which can be mitigated through incorporation.

2 -Protection of assets: By incorporating their property rental businesses, landlords can separate their personal assets from their business assets, which can help to protect them in the event of legal action or financial difficulties.

3 - Improved borrowing rates: Limited companies can often access better borrowing rates than individuals, which can be particularly beneficial for landlords who are looking to expand their property portfolios.

4 - Flexibility and control: Incorporation can provide greater flexibility and control over a landlord's business, allowing them to manage their finances more effectively and make strategic decisions about their property portfolio.

5 - Greater credibility: Incorporation can provide a level of credibility and professionalism that may be attractive to tenants, lenders, and other stakeholders in the property industry.

6 - Overall, there are a range of factors that may influence a landlord's decision to incorporate their property rental business, and the advantages and disadvantages will depend on each individual's circumstances. It is important for landlords to seek professional advice and carefully consider their options before making any decisions.

Well said Mark.
I've been telling many for years to do something. Now rates have gone up, they panicking,

I do apologise if I am not understanding this properly.
I have no debt onproperties but would like to ask does incorporating your property portfolio take away the payment of inheritance tax and CGT?

Reply to the comment left by at 25/05/2023 - 16:48
The article I have linked to below will answer your question.

https://www.property118.com/benefits-incorporating-rental-property-business-no-mortgages/

Is this only beneficial for higher rate tax payers?
Me and my husband have 9 btl properties, all mortgaged and the profit from these is our sole income. We have always been told by our accountants that it wouldn’t be viable for us to become a limited company and they have never been able to offer any other options. Both being in our late 50’s/early 60’s we are now starting to think about the problems we could be leaving our 2 kids and wonder if there are inheritance planning options for us? Advice please!

We just incorporated With Property 118.

Out of section 24 now. Next step is IHT via P118.

I have asked P118 team to start offering Ltd. lending via in house or links to selected lenders for the portfolio. Mark if you are reading this, thanks to the team and look forward to good portfolio lending products with no erc as we plan to sell 1 by 1.

I posted a question on this thread last week but haven’t yet had an answer! I would still like to know if this would benefit myself and my husband on our small portfolio of 9 mortgaged properties? We are lower rate taxpayers but wondered if we could do anything to help with cgt and iht for the future. Would be helpful to know!

Reply to the comment left by Ashleigh at 10/08/2023 - 06:48
Every case is different, it's worth booking an initial consultation with P118 either with Nicky or Gular, they are experts in the field and will be able to advise using your data.

For us it worked with 13 properties, we paid for IHT planning as well, that's yet to be done.

Section 24 may be causing you issues already however there will be CT to pay, but you will be able to offset interest against income.

I watched a C4 property programme on YouTube yesterday, a great panel but not enough time to do the conversation any justice. 2 tenants were pretty upset and were almost stating, letting a property is a service. Lack of housing and low stock is causing massive distress, all the regulations and banning s21 is only adding to a broken system.

As sad as it is and eroding profits, it's time to take stock as filling self assessments later this year will otherwise make decisions for many to sell up.

NB : I don't work for P118.

Reply to the comment left by AT at 10/08/2023 - 07:06
Thank you for your reply. I suppose the only way to find out is to book a consultation. The reason I am a bit wary is that we paid an accountant/tax advisor a £1000 for some tax planning advice which literally resulted in a written ‘report’ suggesting there was little we could do that would be financially beneficial to us, as we are still lower rate taxpayers.
I just don’t want to pay out more money to be told the same thing that’s why I asked the initial question.
Thanks again!

£1000 sounds steep.

The way decided;

My business partner contacted P118 a few years back. Got on the phone prices', they are reluctant to do this now as it takes too much admin and emails are unregulated I suppose.

We contacted another company who wanted to set up mixed partnerships. They were pushy and had 'time limited' deals - all the time.

We had a consultation with P118, zoom call with our accountant on the call as well. Fixed prices.

I was put in touch with another company through a family accountant. Mixed partnerships, they wanted to charge over £5k to set up LLP and other charges were similar to P118 and they only allowed £39k as Directors Loan!

We got back in touch With P118 and pushed the button. We will have a structure set up now and our childern on the company.

If it helps anyone, we started with property as somewhere to invest whilst I was working on Internet in 1996 onwards. This secondary business become primary. We are cash poor but asset rich, like many btl owners.

During good years, we consolidated a handful of peps/isas, sipps and also started ploughing sale of non property into multiple stocks & share accounts under a well k known trading house. This is for future secondary income and I am surprised what has built up! Will we ever touch it, probably not but now this has got me thinking about 'Generational wealth'. It's a topic I have discussed with our children too, they have a new duty.

Whilst being cash poor and asset rich, a hurdle now is extending 2 leases, and when the property market turns around in 12 to 24 months, start disposing. This part needs thought.

Good luck with your decision.