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Should you move your rental properties into a limited company?

Should you move your rental properties into a limited company?

When you first start out building a property portfolio, you may decide to purchase each property in your own name. While this keeps things simple, there are some distinct advantages to creating a limited company to own and manage your properties.

We’ve highlighted five reasons why you should consider setting up a limited company.

5 reasons to run your properties through a limited company

Creating a limited company and becoming a company director may sound like a big move. But, in reality, running a limited company can make managing your property portfolio a whole lot easier, as well as reducing liability and improving your tax position.

A limited company structure offers:

  1. Limited liability – by moving your rental properties into a limited company, you can limit your personal liability if something goes wrong with the property. This means that if the company runs into financial difficulties, your personal assets will not be at risk.

  2. Tax efficiency – using a limited company can be more tax-efficient than owning rental properties personally. Individual landlords are taxed on their rental income at their own personal rate of income tax, which could be up to 45%. Companies are taxed on their profits via corporation tax, at a lower rate of between 19-25%. On top of this, there may be additional tax benefits from being able to claim expenses and allowances against your company's profits.

  3. Better access to finance – a limited company can have better access to finance and borrowing than an individual landlord. Lenders may view a company as a more stable and professional entity, which makes it easier to secure loans for additional properties, expansions or renovations. This can be helpful when growing your portfolio.

  4. Improved management – managing multiple rental properties can be a complex and time-consuming task. By moving your properties into a limited company, you can streamline the management and could even potentially hire a professional property manager to oversee the day-to-day running of your portfolio.

  5. Estate planning – transferring rental properties to a limited company can be a useful estate planning tool. When your properties are held within a limited company, this can allow for easier transfer of ownership to heirs or beneficiaries in the event of your death. It can also provide greater flexibility for structuring your estate and managing any inheritance tax liabilities.

Talk to us about creating a limited company structure

If you’re planning to expand your rental property portfolio, or want to maximise the efficiency of your existing portfolio, moving ownership to a limited company makes a lot of sense.

As your adviser, we can run you through the process of getting incorporated as a limited company and can connect you with experienced legal advisers, if necessary. We can also help with your tax planning to deliver the most tax-efficient outcome from your rental income.

Get in touch to talk about setting up a limited company.