The Business Bulletin
Is your property portfolio safe from tax? Changes to Mortgage Interest Relief came into effect in 2020 – a year on has much changed?
Landlords have been limited to
For larger portfolios – generally
income tax relief at the basic rate
those of 5 or more properties there
of 20%. They have seen a large
may be a solution.
increase in their taxable profits and a
For the purposes of this article
the increased liability be softened? And the answer? Potentially – yes! Jean and Dave may need to incorporate their property portfolio.
corresponding drop in ‘real’ profits.
let’s use a fictitious family – let
In other words, transfer it into a
Compounded by the removal of
me introduce you to Jean and
limited company – one that they’ve
wear and tear allowances previously
Dave Smith-Jones. They’re in their
set up specifically for this purpose.
10% of any rent receipts could be
60s and have built up a handy
This approach can yield several
offset by this allowance.
property portfolio. The plan is to
potential benefits.
Other Taxes have impacted to – 3% Additional Property Surcharge for Stamp Duty, differing rates for Capital Gains Tax 18% and 28% on property disposal, the watering down of relief
earn regular rental income through their retirement, before passing the portfolio on to their children, Lucy and Mike. The question that’s bothering Jean
1. Jean and Dave will still receive the full benefit of Mortgage Interest Relief. 2. They’ll retain profits in the
against a former private residence
and Dave relates to the legislation
company, thus avoiding
giving rise to further CGT bills.
(outlined above). Can the impact of
unnecessary income tax.
Issue 13 – Finance | 15
