Acting for over 200 property investors, ranging from private landlords to corporate owners of high value residential and commercial portfolios, our team has extensive experience in this area.

Landlord accountants and tax advisors

Landlords face a range of accountancy and tax issues which have never been more complex than now to navigate. In recent years many investors have seen steady growth in both property values and rental income while enjoying a relatively attractive tax relief on financing costs.

However, recent changes to the tax system are now prompting property investors to seriously reconsider how to structure their businesses in order to avoid potentially costly mistakes in the future.

In response to the introduction of a number of changes to the tax system,  many landlords are moving their properties into a company and purchasing any additions to their portfolio through the same company. While this may be the best course of action for some, the options need to be evaluated on an individual basis.

From 6 April 2017, individuals will only be allowed to deduct 75% of their borrowing costs, including interest, incurred in running their lettings business. The percentage of disallowed interest will increase by 25% every year until 6 April 2020, from this point onwards, all interest paid by an individual landlord will be disallowed. Instead, you will receive a tax credit equivalent to 20% of the disallowed interest to offset against their income tax liability.

How will the changes to tax relief affect you?
Highly geared investors could find they are paying tax on non-existent profits. This will make it uneconomic for those individual landlords to continue in business.

How will this affect you if you own the property through a company?
The restriction on the deductibility of finance costs will not apply to corporate landlords. A company can continue to deduct all the interest and finance costs in calculating the taxable profits of its property investment business. However, a company may find it has to pay a higher rate of interest or have more difficulty securing mortgages on its rental properties. Lenders could insist that the directors of the company provide personal guarantees before advancing loans to the company.

The advantages of investing in property through a company largely depend on how long you intend to hold the property for. If you are owning the property for the long term the main advantages of investing through a company may include:
Less tax on disposal - The capital gain is reduced for the effect of inflation (indexation allowance) before the net amount is liable to corporation tax.

Roll-up of Profits - The profits made by the property can be retained by the company (after corporation tax) until extraction at a later date, such as after retirement.

Disposal as an active property rental business – The company can be sold as an active business meaning any gain made is liable to corporation tax, which is more favourable than capital gains tax paid by an individual.

Succession planning – Shares in the company can be passed on more easily than a share in a privately held investment property.

If you are investing for the short term additional considerations should be made

Capital Gains tax
A company may not offer the most tax efficient structure as the annual capital gains exemption allowance is not available for companies, the company will therefore pay corporation tax on all its net gains.

Annual Tax on Enveloped Dwellings (ATED)
If you are investing in higher value UK residential property, annual tax on enveloped dwellings (ATED) will also need to be considered. ATED was introduced as an anti-avoidance measure with the intention of making it less attractive to hold higher UK residential property indirectly through a company or other Non- natural person.

It applies to any property acquired after 1 April 2013 with a market value of £500,001 or above (from the 1 April 2016 or after)

As specialist landlord accountants we provide a comprehensive range of services for property investors. Contact us on 02392 484 356 for more details or visit our property accountants page.


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Property Investors Key Contact

Kevin Gilbert, Director

Kevin joined Morris Crocker in 1981 and throughout his career has specialised in the property development, investment and construction sectors. He acts for all sizes of businesses, from individuals through to public companies.  His particular interest and expertise is in tax mitigation.

T:023 9248 4356

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We have been fortunate to have Morris Crocker supporting our internal payroll administration for over 10 years. All members of staff we have dealt with at Morris Crocker have been efficient, knowledgeable and polite and have provided an excellent payroll service to Moneybarn. Jo Laney - Moneybarrn

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