What’s driving the boom in new property companies?

Changes in the way buy-to-let landlords are taxed on their numerous properties have led to a rise in the number of property-related companies registered in the UK.

Over the course of several years, the Government has introduced new rules making it less attractive to own investment properties – even if a person owns just one property additional to their place of residence. However, certain types of relief are available to those who establish their venture as a limited company, which is encouraging more people than ever to set up property businesses within a limited company structure.

Here at Champion, we’ve had property investors approach us with various reasons behind their wish to set up a limited company. Some have only one or two buy-to-let properties under their belt right now but wish to buy more in the future and know they will face harsh tax rules if they do. Others want to achieve a hybrid set up; they have multiple properties they’d like to move into the running of a company, while others should remain outside of it. Meanwhile, some families are looking to set up property companies to take advantage of the flexibility that shared ownership provides in comparison to individual ownership of properties, particularly when considering the possible longer-term intention to pass ownership onto their children.

Setting up a property company is so appealing right now as it offers more flexibility to those looking to build a portfolio. Firstly, there’s the opportunity to claim tax relief on mortgage interest, which is now denied to higher rate taxpayers who own properties in their own name. Additionally, higher rate taxpayers – or those close to the higher rate threshold – must declare income from individual properties, which will take them even further into the higher tax band; this higher rate of tax is avoided when properties are managed as part of a company. Yes, you have to pay Corporation Tax on the profits generated by the properties within your company, but it’ll only fall into your personal tax return if you choose to draw the money out of the company.

Our team of experts at Champion have many years’ experience supporting landlords to expand their property portfolio and help them decide whether to do that via a limited company by assessing each case on its individual merits to ensure we’re offering the best possible advice and service. Initially, we’ll look at your overall position: how many properties you already own? How many sales are in the pipeline? What is each one worth and what are your plans for each? Then, we’ll explore your future aspirations: how long do you want to own each property? What are your motivations for setting up a company? How do you want your business to be structured? In some cases, setting up a property company isn’t in someone’s best interests, and we’re able to advise if this is the case, offering an alternative solution in such an event.

Once your property company is set up, we’ll provide traditional bookkeeping and accountancy services, as well as tax planning advice, company accounts and Corporation Tax returns. Plus, our close connections with mortgage advisors and property solicitors mean that we’re also perfectly placed to support landlords and property company owners to progress live and future purchases, so we can assist you as your property portfolio grows.

As this trend continues to boom, we’re available to support those looking to make wise investments with their cash, ensuring you have a professional, efficient plan in place to help you get the most from your property portfolio.