Argh! Can I make the tax relief reductions disappear?

25 Oct 2018

Argh! The Tax changes are affecting me now

  • – How can I mitigate the impact on my pocket come January?
  • – Should we consider “incorporating” our buy to let portfolio?

The changes in claiming mortgage interest relief are going to actually hit investors pockets come January which means more and more buy to let investors are considering restructuring their portfolios. We have been discussing this issue with Sean Hughes who is a qualified professional specialising in property tax.

Incorporation is an option which you might want to consider – particularly if you are a higher rate tax payer keen to mitigate the impact the tax changes will have on you. Moving your properties into a limited company may well involve costs, however potentially you may qualify for incorporation relief if you can prove that you operate as a “business”.

For most, moving properties from individual ownership into a limited company will involve immediate costs which can be quite large. You have to consider legal costs, company set up costs but more importantly, capital gains potentially and 3% stamp duty on second properties. If your property is leveraged you may need to consider whether your finance company will be comfortable with that – anecdotally this is not normally an issue.

If you can prove that you operate your portfolio as a business you may gain the benefit of full incorporation relief and thereby mitigate any capital gains or stamp duty cost involved in transferring the properties. In order to move properties from individual ownership into a limited company and benefit from incorporation relief,

  • the annual turnover ( rental income) must be greater than £20,000,
  • there must be a minimum of 5 properties and
  • you must spend a minimum of 10 hours per week, on average, looking after the portfolio ( it could be accounting, repairs, rent collection- re financing, looking for new investments)

The other important issue to note when considering incorporation is the ease of refinancing should you wish to. Historically getting finance for limited companies investing in buy to let portfolios was difficult however this is changing. In fact the proportion of buy to let limited company mortgages has risen significantly and now almost 45% of lenders offer limited company products. Recent stats show that in 2018 limited company lending accounted for almost 40% of the buy to let market.

If you think this may be of interest to you, you might be keen to chat to Sean.

Who is Sean Hughes?

Sean is a Chartered Tax Advisor specialising in advising property investors. Sean started his career with Baker Tilly in 2008 and has dealt with landlords throughout his career.

When George Osbourne moved the goalposts with tax changes for the property sector in 2015, Sean knew he could help level the playing field and set up his own tax advisory company, Comprehensive Tax Planning.

Sean has incorporated the property portfolios of over 40 investors and regularly speaks at property events, including Residential Landlord Association events.

You can get in touch through email at or read more on his LinkedIn page.

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