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I was considering selling my current home to my limited company as it maybe more tax efficient. E.G only paying 20% tax vs 40% income tax. I suspect it won't be worth my time as I will have to pay stamp duty.
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I read online "if you can prove that your property portfolio is your business, then you can incorporate your business, which includes transferring into the limited company your properties without paying SDLT. Obviously, you need to jump through hoops but it is possible."
Then I asked CoPilot (AI)
You're correct! If you can demonstrate that your property portfolio is indeed a business and not just a passive investment, you may be eligible for Incorporation Relief. This relief allows you to transfer your properties into a limited company in exchange for shares, deferring Capital Gains Tax (CGT) until you sell those shares.
However, it's important to note that Stamp Duty Land Tax (SDLT) is generally still payable unless the transfer involves a partnership. The key is to show that your property activities are substantial and active enough to qualify as a business
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Has anyone on here done this?
I want to. I registered a partnership and now submit a partnership return. We hold 7 properties and in a year I will investigate further how incorporation can be achieved. I also manage all of the properties without any agency so spend a lot of time on managing and repairs.
You need to talk to a Tax Adviser.
S162 incorporation relief is used to mitigate Capital Gains Tax (CGT), you may see it online often reffered to in the context of Ramsey v's HMRC.
S162 incorporation relief recognises the fact that ownership of the business will not change. Consequently, any capital gain on the sale of the business is rolled over.
However, it is worth noting that stamp duty land tax would still be chargeable on property transfers. Therefore, while the transfer does not crystallise a capital gain, it is still recognised as an acquisition by the company.
It may be plausable to move your properties first into a partnership and from there into a LTD Company, via a long-process. Again, please talk to a Tax Adviser.
A few notes also
Ok yes will do thanks
I'm planning to sell a private BTL to a well-established BLT LTD and have reached out to my accountant to work out what the CGT obligation will be. I will ask about this.
When i moved some properties to the LTD in 2017 the CGT obligation was below the then personal. CGT threashold of £12k so it was not a problem but for this move it will be worth me investigating.
You won’t get incorporation relief on a sale to a third party business, or if you’re just transferring one BTL. The relief is designed to be for trading businesses run as sole traders or partnerships who want to incorporate.
So if someone was looking to buy a new property to rent out, would you recommend that they start a ltd company and buy the property through the business?
Its not impossible (but maybe a little harder than a BTL) to get a Limited Company mortgage - I’ve done multiple in recent 4 years so don’t listen to naysayers. I would say a house is much easier than a flat to buy as an investment generally speaking, as mortgages don’t scrutinise it as much. At least from my experience
But without needing a mortgage, through a ltd company would be the best option?
Always take a Mortgage! Leverage your assets its the best - even millionaires do this (the rates are stupid high but still worth it!)
Yes through a Ltd is best option, it gives you more flexibility tax wise both now & In future.
Thank you!
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Much harder to get a mortgage through an LTD. If you are a cash buyer it's better for sure.
Not true. Jaur taken 2 out this month with no issues.
If you have one property, there is no way you will qualify for incorporation relief. It’s difficult even with a portfolio of properties.
Be very very cautious about trying the partnership route. See here for a recent tax case where HMRC won and CGT was payable.
ok thanks good advice
am just selling my property to my business.
since its my only property no CGT.
I have just made a ltd company under the guidance of my accountant for tax purposes, which there are a few. I had however taken out a mortgage last year in my name and wanted that in the ltd company. Selling it was not a good option due to stamp duty etc, but what you can do is change the property beneficiary, so not the legal owner, but who basically is paying for it and taking payments for it etc. I forget the form we had to usez but I'd you DM me I'll send it over if you wish. We have since bought another 2 properties via the Ltd with no issues at all. They are BTL mortgages, so can't say for a normal mortgage.
Hi can u send me this form plz thanks
I don't get the LTD thing. You will need to pay Corp tax on any profit.
Then to get the money out the company into your personal wallet, you can draw limited tax free dividends, and then pay income tax at whatever rate your total income comes in at.
So, where is the benefit?
Please excuse my ignorance, but this confuses me.