Can we transfer our property portfolio from our joint name into a limited company structure and should we consult our accountant?

My wife and I have 2 buy to let properties and are in process of acquiring another property within a month or so. We have buy to let mortgages on all properties. and they are from the same lender. I was wondering if it is possible to transfer all the properties from our joint name into a limited company Status. I would like to know

  •  Whether the lender would allow us to transfer the properties in the name of the limited Co
  •  What tax implication will there be
  •  What are the process for transferring the properties into a Limited Co
  •  At the present moment the properties are managed by estate agent as to repairs and rent collection.

 Do you think I should consult my accountant?

I am assuming that the reason you are asking all these questions is because the tax relief that residential landlords get on finance costs, including mortgage interest, will be restricted to the basic rate of income tax (20%) regardless of the landlord’s actual tax bracket. This change is being phased in from 6th April 2017. Further, and perhaps crucially, finance costs will no longer be deductible before calculating taxable profit.

This means that many landlords will be worse off. Some may go from profit to loss. Even basic rate tax payers could find that the changes will take them into the next tax bracket - with dire consequences. 

As a result, many landlords have discovered that they would be better off owning their properties in a limited company structure, usually a Special Purpose Vehicle (SPV). Here at Mortgages for Business, 63% of our landlord customers are now making new purchases via a limited company, and, increasingly they are moving the properties they already own across too.

However, it is very important to note that there is no process for transferring personally owned properties into a limited company. Instead, each property must be sold at open market value which will incur all the usual costs of sale including remortgaging, stamp duty (plus the 3% surcharge) and potentially capital gains tax. 

To find out where you and your wife stand in all of this, I urge you to consult your accountant or a professional tax adviser as a matter of urgency.

If you discover that incorporation is the best route for you, you’ll be pleased to hear that there are now more than a dozen lenders offering between them some 200+ buy to let mortgages to limited company borrowers. Do get in touch if you need help finding products to suit your particular situation, your existing lender may or may not be the most appropriate solution. 

Setting up a limited company is fairly straightforward, costs around £15 and can be done online at Companies House. If you are unsure, get your accountant to do it for you.