Several property experts have warned of possible dangers in landlords forming limited companies in a bid to minimise their tax liabilities.
There have been reports of an increase in landlords incorporating in a bid to minimise the impact of phased reductions in mortgage interest tax relief – but the speakers at the Association of Short Term Lenders were much more wary.
Nick Cartwright, a tax partner at accountancy firm Smith & Williamson, is cited in Property Reporter as saying there is a potential double layer of tax. He said that the “overall tax rate, if rental income is distributed, could be as much as 50 per cent with current rates.”
He continued by saying that “incorporation is good if you want to build up money within the company, but not if you want to live off the income as it is earned.”
Cartwright also said that new regulations likely to be introduced shortly, requiring tougher affordability tests for borrowers, would apply both to traditional landlords and those in companies.
At the same event, and also cited by Property Reporter, Susan Emmett – a research director at Savills – warned that as a result of increased tax burdens on buy to let investors there had been a drop in interest from potential landlords.
