This case study illustrates just how unfair the UK tax legislation will become for private landlords as of April 2020. Perhaps more importantly, it provides insight into what can be done to “level the playing field”. Let’s assume that both businesses own assets worth £2,000,000 and have 75% LTV mortgages secured on them at an interest rate of 5%. In other words, their annual finance cost bill is £75,000. Now let’s assume that both businesses make profits after finance costs and all other expenses of £50,000. The hotelier will pay £7,500 of income tax. This is broken down as follows; £nil on his first £12,500 of net profit and 20% tax on the next £37,500. However, the private landlord cannot treat his finance costs as a legitimate cost of business in the same way as the hotelier. Accordingly, his tax bill is... [Read More]

When used correctly, Limited Liability Partnerships “LLP’s” can be an excellent structure for landlords, not just for tax planning but also for the evolution of rental property businesses generally. For example, many landlords wish to eventually leave a legacy to the next generation. They also wish to consider succession planning, which is something all business owners should do. Do you want to be tied to your business until the day you die or would you like to think you can take more of a back seat when you reach retirement age? One of the key advantages of LLP’s is HMRC accept that it is perfectly legitimate for taxable profits to be allocated disproportionately to ownership between individual Members (not Corporate Members’ though). Landlords LLP Case Study Let’s say that Mr X has a property rental business in his own name... [Read More]