Professional advice and a detailed comparison of costs impacting an incorporated vs unincorporated business throughout are recommended to ensure the implications and associated costs are fully understood prior to making a final decision. The below information is provided to outline the potential benefits of residential property lettings business incorporation as well as the range of issues you need to consider. This certainly is a decision not to be made lightly. If you would like to discuss your specific circumstances in more detail please do not hesitate to let us know. We would love to help you work through, what can be, a key milestone for you and your business.
· The fixed-rate mortgage coming up for renewal.
· Deferral of capital gain via Incorporation relief (provided the relevant criteria are met)
· Useful for IHT planning and the estate of the original owner via a share issue to the younger generation
· Tax-efficient distribution of profits
· Corporation tax rate 19% for profits up to £50,000 (from 1st of April 2023)
· CGT annual exempt amount (AEA ) for the tax year 2023 to 2024 will be reduced to £6,000
· Annual Tax on Enveloped Dwellings
· SDLT / potential for reduced SDLT via Multiple Dwellings Relief (MDR) claims.
· Corporation tax rate 19% for profits up to £50,000
· Finance cost is a deductible expense.
· VAT if the portfolio includes commercial property.
Other practical considerations to be taken into account:
- opening new bank accounts in the company’s name
- changing tenant deposit accounts
- notifying tenants and altering any tenancy agreements
- Insurance will also need to be rearranged.
- preparation and filing of company accounts and tax returns, as well as other annual filing requirements which may represent an additional cost.
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