Does it pay to be a landlord?

Does it pay to be a landlord?

Section 24 is having extreme tax implications for landlords. So much so that new research has revealed that UK private landlords are paying over double in tax than Britain’s biggest retailer, Tesco.  

“The estimated total income tax contribution by private landlords exceeds £3.8bn annually, which is more than double Tesco’s entire annual tax bill of £1.63bn in 2018, according to fresh research by the National Landlords Association (NLA).”

The significant tax deductions begs us to ask the question of whether it’s worth being a landlord altogether.

However, if we look at the bigger picture, property remains a good investment with the fast growth of capital values. What’s more, recent research shows that property still beats a pension. So before getting too down-heartened, it’s worth exploring alternative solutions for avoiding the high tax bills.

Company Director vs Private Landlord

Incorporating rental properties into a limited company is certainly an attractive option to avoid such harsh taxation, although it’s not for everyone.

There are a number of benefits of incorporating or expanding your portfolio through a SPV (Special Purpose Vehicle) limited company, but the most obvious reason is to reduce your tax bill.

With a limited company, mortgage interest remain tax deductible and by 2020, the main rate of tax for an SPV will be reduced to 18% for profits below £30,000.

The benefits stack up for landlords looking to expand their portfolio in particular. However, tread with caution since it’s not the solution for all landlords, so be sure to do your research.

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