Buy to Let: Should I incorporate as a limited company?
In 2015 it was announced that mortgage interest tax relief would be gradually phased out by April 2020. It means that by that date landlords will no longer be able to deduct their mortgage costs from their rental income.
In the 2019/2020 tax year, landlords will only be able to claim 25% of their mortgage tax relief and should therefore start planning accordingly. In the 2020/2021 tax year, all of a landlord’s gross rental income will be taxable and landlords will instead be given a 20% reduction in their tax liability.
The reduction has led to a sharp rise in the number of landlords investigating whether they should transfer their existing buy to let properties to, or purchase new properties through, a limited company structure.
As is the case with all important investment decisions, there are pros and cons to incorporating as a limited company which need to be carefully considered. Landlords should always consult a suitably qualified tax accountant and seek independent legal advice beforehand.