This, unfortunately, is not a simple question to answer as there are many possibilities. So this article will provide some insight into some of the aspects that you will need to consider. We would recommend speaking to a professional such as ourselves ahead of making any final decisions to ensure that you don’t find you have a nasty surprise when you look at the tax bill or any other impacts in making a change.
We have found for a few there are benefit’s to making a change and we have found many where it would be extremely costly therefore not beneficial at this point in time.
However, we will go through briefly a few of the implications that you will need to consider when you make a decision on whether it is an option or not.
- To start with you should be considering what type of taxpayer you are. Are you paying tax at the higher rate or the additional rate of tax? The higher rate of tax you are paying the more beneficial it may become if you move income into a Limited Company structure. The big question will be what cost it will be to make the transfer, how much will you be saving and also what your future intentions are of either holding or disposing of the properties.
- When you sell a property, even if it is to yourself, there will potentially be Capital Gains Tax Payable. This is payable on the gain that you make on the property after taking into account your capital gains tax allowance which increases slightly each tax year. Depending on what gains or losses you make on the properties you own may determine which you transfer to a company or even be a driver in deciding against, especially if the gain is quite considerable. The capital gains tax rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers which can be quite an expensive bill depending on the gains. If you do have any losses then these will either need to be in the same tax year as a gain or after a gain. If you have a loss but no gain to set it against it will be carried forward until you have a gain to set it against in the future.
- Remember that Stamp Duty will be payable based on the value of the property being sold at the appropriate rates.
- Depending if you own the property or if it is mortgaged. For any properties that have a mortgage on, you will need to refinance which could incur early repayment charges, refinance costs for brokers, valuation fees and fees for the new finance that has been agreed.
- What are your intentions with your properties? If you are looking at selling properties you may prefer to retain them in your own name, however, if you are looking to keep them forever then it may be beneficial to move them to a limited company. Obviously, plans change so your intentions may change, however when reviewing your position it is important to consider what you are intending at the time as it can have a big impact on the best approach to take.
This is not a complete summary of the aspects to consider and is a brief overview of some of the items which have a bearing on the position at present. This is based on the advice we are able to provide now. However, should there are any further changes made by the government, this may be very different in the future.
April 10th, 2018