Rental properties

The question we always get asked is “should I buy this rental property in my name or a limited company?”.  The answer is no longer straight forward and will depend on your individual circumstances and it is not just about the tax.  People started buying residential investment properties in limited companies to avoid having the mortgage interest relief restricted.  The Government have countered this with increasing the corporation tax rate from 19% to 25% from 1st April 2023 for close investment companies (companies with connected parties, that is, family members).  The other problem with limited company structures holding residential property is the ATED rules (Annual Tax on Enveloped Dwellings) which apply where the property has a value currently equal to £500,000, these are complex and carry penalties for getting the filing wrong.   The other problem that comes up is letting a property to a family member at undervalue.  HMRC have rules which require you to restrict the expenditure on such a property on a fair basis.  This type of property could never be in a loss position and the restricted expenses would simply be wasted.   There are many matters to consider and not always tax dominated.  If you need assistance then please give us a call to discuss 01245 326280.

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