Tax Consultant, Spofforths
Property ownership is an interesting thing and different angles work for different people. Most commonly people own property in their own personal name, whether alone or with another person(s). An alternative route is to own a property through a company or Trust, so it’s always good to know how your tax position can be affected by these different options.
In terms of tax, where you own the property personally you are taxed on any profits generated, which could be at 20%, 40% or 45% depending on your other income. A Trust is subject to income tax at a rate of 45% and a company is subject to corporation tax, typically at 20%.
Whilst the rate of tax payable by a company can be lower than for an individual there is the potential of being taxed twice. Companies are subject to tax on any profits made from the rental or sale of the property, plus Income Tax is payable on any profits extracted from the company. The Capital Gain is at a rate of 20% as opposed to 28% for an individual or Trust. The rate of tax payable by the shareholders on profit extraction can be minimised with careful planning your tax liabilities can be minimised.
If as a landlord you are keen to reinvest any profits into new properties then operating as a company may be beneficial. If you are a basic rate tax payer, however, you may not benefit from the low company tax rate and personal ownership could give you more flexibility on the ultimate sale of the property.
It is also important to be aware of the other non-tax issues surrounding property ownership in different structures, such as raising finance, which can sometimes be more difficult in a corporate structure.
Whether you are a new landlord or have a portfolio of properties already it is important to get professional advice to ensure any decisions made reflect your personal circumstances.
Make sure you take full advantage of the tax saving opportunities open to you and call us today on 01403 253 282 or email firstname.lastname@example.org.