Letting agent tells landlords to set up companies

A letting agent is urging landlords to try to circumnavigate tax changes aimed at the buy to let sector by incorporating their businesses.

The summer Budget earlier this month announced that tax relief for the highest-income private landlords would be reduced from a current 40 per cent to 20 per cent by April 2020.

“Someone told me that we had a housing crisis in the UK, and I am not sure that anyone told George Osborne that before the Budget. To penalise landlords by cutting the tax breaks to 20 per cent is in my view a little short sighted” says David McKnight, managing director at Martin & Co Derby. 

“The suggestion that if you are a landlord, you must be rich is unfounded and in my view the vast majority of landlords are good folk just earning a living. Landlords who can afford to buy good housing and look after their tenants should have some form of incentive” he says. 

However, not everyone agrees that incorporation will benefit every landlord.

Last week we reported that accountancy firm Jeffreys Henry LLP cautioned that while some landlords may consider raising rent to compensate for the higher tax bill or selling altogether, longer term property investors should be more circumspect. 

Transferring existing property into a limited company may incur Capital Gains Tax and Stamp Duty Land Tax liability, the firm said. 

It suggested some existing landlords may be better off shifting rental income to spouses on lower tax bands before looking at limited companies.