Let’s look at the advantages and disadvantages of incorporating your property portfolio.

Pros:

  • The main benefit is the difference in tax. Limited companies pay corporation tax (19%) which is lower than income tax (20%/40/45%) on profits. If you’re a higher rate tax payer, this can make a significant difference.

  • Tax relief is available on the full mortgage interest for limited companies, whereas it is restricted on personally held properties (section 24).

  • If you want to pass your buy-to-let properties onto your children, it’s much simpler to transfer limited company shares than a privately held property.

Cons:

  • The costs involved can outweigh savings, with buying and selling taxes (SDLT, CGT), and conveyancing costs to pay.

  • There are the administrative costs of setting up and running a limited company to consider, plus the time and effort of filing yearly accounts (or the cost of appointing an accountant to do this for you.)

In addition to these pros and cons, consider the following:

Does portfolio incorporation align with your property investment goals?

For example, are you:

  • Saving for retirement?

  • Building a portfolio as a main income source?

  • Planning on passing your property portfolio on to your family?

If necessary, go back to your business plan and write a version for incorporating your portfolio

  • Where are you now?

  • Where do you want to go?

  • How are you going to get there?

  • What will success look like?

Take the time to weigh up the pros and cons against your goals, and talk to a property tax advisor before deciding if incorporating your property portfolio is the most tax efficient option for you.