Landlords can take advantage of stamp duty cut with limited company moves


Following several years of regulation and tax changes, buy-to-let landlords have benefited from the temporary stamp duty reduction on the first £500,000 of the property purchase value between July 2020 and March 2021.

According to Hamptons, the average buy-to-let investor purchasing a home under £500,000 would save £4,270 as a result of the new changes.

And it is not just those looking to expand their property portfolios that can benefit.

Landlords who had planned to move a property or properties into a limited company structure could also enjoy some tax-savings.

However, I would remain cautious and urge brokers to ensure any landlord considering a move to a limited company has first consulted with a professional tax adviser to ensure it makes sense for their particular set of circumstances and that their landlord clients understand all the cost implications involved.

Moving properties into a limited company

While buy-to-let landlords do not currently have to pay the usual rate of stamp duty for properties under £500,000, it’s important to be aware that the stamp duty surcharge is still in existence.

This means that landlords will still pay tax at a rate of three per cent on any second or additional properties purchased from now until 31 March 2021.

Before the chancellor’s announcement, when landlords wished to move a property into a limited company structure, they would need to pay stamp duty on this transaction – the landlord would essentially be selling the property to the limited company.

While the surcharge still applies, landlords could save substantial amounts by transferring their properties into a limited company during this short window of opportunity.

Landlords considering a move should not do so until they have received professional tax advice.

Limited company popularity continues

Of course, using a limited company is not a new concept for landlords and has become increasingly popular over the last few years.

The BVA BDRC Landlords Panel found that 17 per cent of all landlords hold at least some of their portfolio within a limited company, rising to 44 per cent of landlords with 20 properties or more.

Looking ahead, buying a property within a limited company structure remains the most preferred purchase route, with 45 per cent of landlords saying they intend to buy their next buy-to-let property as a limited company.

That figure rises to 59 per cent for those landlords with 11 or more properties.

While that has fallen by nine per cent since Q1 2020, for landlords with 11 properties or more purchasing a property within a limited company still remains the most popular option.

It’s important to identify the right product for your client, taking into consideration all of their needs. There are number of products still available on the market which clients don’t have to pay a premium to access.

Brokers that have established and trusted relationships with specialist lenders will be able to move more quickly and take advantage of the current favourable conditions.

When it comes to specific tax matters and seeking advice, we encourage brokers to ensure their landlord clients have sought independent tax advice from a professional who is suitably qualified and can advise them on all possible situations.

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