More Landlords Opting To Purchase Buy To Let Property Through A Limited Company
New research suggests that an increasing number of landlords are looking to purchase their next buy to let property through a limited company. The recent study undertaken by Foundation Home Loans indicates that 63% of landlords intend to purchase their next rental property via a limited company, with this figure rising to 65% amongst those with portfolios of 11 or more properties.
Da-Hae Kwon is a solicitor in our Legal 500 recommended Commercial Property department. She frequently assists landlords across Buckinghamshire, Hertfordshire and Greater London with the purchase of investment property and offers her thoughts on the findings.
“It is true that an increasing number of landlords are deciding to purchase properties through a limited company vehicle. The main cause behind this can be assumed to be the tax benefits. When owning a property for buy-to-let purposes the income earned through the company will be subject to Corporation Tax rather than Income Tax. Depending on the amount of income tax you pay, this could be a more tax efficient method of owning a property, i.e it would be more beneficial for those who pay higher income tax. However you must bear in mind that when purchasing a property through a limited company, higher stamp duty rate will apply. To make the most tax efficient decision, you would need to seek advice from a qualified accountant.
Although it may be more tax efficient it is also however usually a little more difficult to obtain lending as a limited company and most lenders will require a personal guarantee from the directors of the firm. This allows the lender to have recourse to the directors personally in the event the company defaults, which means the potential lenders may want to value the company as well as the assets held by the directors to ensure their interest is protect. Any decision would depend on personal circumstances so seeking professional advice would be step one.”
Lennons Solicitors is a full-service law firm based in Buckinghamshire, with offices in Chesham, Amersham and Beaconsfield. Our “excellent” Commercial Property team were recently recommended by the highly respected legal directory, The Legal 500. If you’re seeking advice on purchasing buy to let property, talk to Da-Hae or one of the team on 01494 773377 or email us at [email protected]
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