11:52 AM, 10th February 2023, About 2 years ago 18
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Will the mass exodus of landlords wreck the livelihoods of professionals and stakeholders in the private rental sector?
Landlords have sold 400,000 properties since 2019, when the total number of private rental properties peaked at 4.9 million. Shockingly, the downward trajectory looks set to get worse according to a recent landlord survey by Simply business, where 33% of landlords said they are no longer making a profit and plan to sell up.
Based on these statistics 1.5 million rental properties could soon disappear from the market, which will not only affect the tenants but also have a direct impact on the thousands of businesses who earn their livelihoods supporting this sector, such as:
Those who work in the sector and speak to landlords every day have heard countless stories of how recent interest rate rises have exposed the horrendous effects of the Section 24 restrictions on finance cost relief.
With interest rates set to remain at current levels (if not higher) for the foreseeable future, is the writing on the wall for the private rental sector?
If private landlords can escape the effects of section 24, then the answer is NO!
One solution is to transfer rental property businesses into a Limited Company. However, many landlords may have considered it and many have incorrectly concluded (without taking sound professional advice from Property118) that incorporation is prohibitively expensive due to Capital Gains Tax, SDLT and the cost of refinancing. The reality though, in many cases, is there are reliefs available to facilitate the sale of a property rental business to a Limited Company in exchange for shares. It is also possible to use indemnities within the Business Sale and Purchase Agreement to defer refinancing until the end of the existing mortgage term.
Over the past six years, Property 118 and Cotswold Barristers have assisted landlords to move over £2billion of rental property into company structures without the need to refinance, and with the benefit of 100% CGT and SDLT relief.
If you run a business that relies on the Private Rented Sector, the best way to protect your own business is to help your landlord clients to solve their tax problems.
CLICK HERE TO BOOK a 15-minute chat with me about how we can all help each other.
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Mark Alexander - Founder of Property118
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Sign Up3:35 AM, 12th February 2023, About 2 years ago
Reply to the comment left by Squawker at 11/02/2023 - 11:30
From an income tax perspective, the costs of switching are likely to be prohibitively expense in your case. However, depending on your age, your long term aspirations and your views on inheritance tax, you might want to take a longer term view when you fully understand what is possible.
Paul Essex
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Sign Up13:32 PM, 12th February 2023, About 2 years ago
It is now important that we keep up with current rents. Having a tenancy at low rents where there could be a freeze or major costs imposed is now really high risk. If your rent matches the local norm at least your tenants can move on without too much pain.
From bitter experience I can confirm that there is little appreciation for a lower rent, just a refusal to move because everything else is more expensive!
Dominic Johnson
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Sign Up20:34 PM, 12th February 2023, About 2 years ago
Reply to the comment left by Jonathan Chapman at 11/02/2023 - 01:59
Oh no, it's far worse than CPOing small landlords, they'll just bankrupt you.
£27k to get a C rating EPC, how much more for the B or A that will inevitably follow.
If you don't do the works, the council does, takes you to court for the debt, and just siezes the property, and your family home too as well no doubt.
All the while your tenant hasn't paid a penny in rent in 18 months and you are still waiting for a court date because the judge told the tenant to lie about the deposit.
Richard Burton
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Sign Up21:26 PM, 12th February 2023, About 2 years ago
Hi Property118 you mention 100% of CGT can be avoided is this via a LLP? I've looked at this option and been advised by legal and financial professionals that LLPs could be a liability if HMRC decided to go after people who've avoided or deferred paying CGT using an LLP.
If your suggestions are not via the LLP route then I'd be interested in talking to you. Do you offer a free initial consultation?
Mark Alexander - Founder of Property118
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Sign Up21:54 PM, 12th February 2023, About 2 years ago
Reply to the comment left by Richard Burton at 12/02/2023 - 21:26
No we do not offer free initial consultations, because we believe in establishing all the facts and objectives before we make any recommendations. This takes several hours over several days.
All advice is in accordance with HMRC’s manuals. We not not recommend “schemes”.
Wherever possible we like to involve our clients existing professional advisers in the consultation process.
TheMaluka
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Sign Up9:16 AM, 13th February 2023, About 2 years ago
Reply to the comment left by Dominic Johnson at 12/02/2023 - 20:34
How cynical, but true.
Mark Alexander - Founder of Property118
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Sign Up11:18 AM, 13th February 2023, About 2 years ago
Reply to the comment left by Squawker at 11/02/2023 - 11:30
It is impossible to answer your question without fully understanding your circumstances and long term objectives.
In the short term it’s probably not a viable option, but if you live through at least one more property cycle the pendulum could well swing in the other direction if you factor in inheritance tax.
CB
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Sign Up19:18 PM, 13th February 2023, About 2 years ago
Hi
I am a portfolio landlord who has been losing more and more money to HMRC since 2017. I finally had a Tax Consultation and learned so much more about how much I could save if I incorporated. It has taken me a long time to accept and understand that this is what I have to do to stay in PRS. Jonathan Chapman has been truly amazing, explaining everything down to the last detail. I already know how to run my business but I didn’t know how to keep it profitable until now.