I currently own a flat, and have started looking at using some of the equity out of this property to buy another for rental. I was wondering if it would be sensible to set up a company and put the new property into the company rather than own it myself, as the mortgage interest rules being brought in would hit me on the new property and the one I currently own. I understand I cannot move the property I own now into the company as I would be hit with a hefty capital gains tax bill, but wanted your thoughts on if it was a good idea or not.
Arthur Weller replies:
Maybe your best option is to search for a mortgage lender who would be prepared to lend directly to the company, with a charge on the new property bought by the company. Due to the new interest relief rules, lenders are becoming more attuned to the idea of lending to companies. As a further alternative, it may be possible to borrow personally, lend the money to the company, and claim 'qualifying interest' relief against your personal income tax liability. However, this would need proper tax advice to see if it was possible in your situation.
This question was first printed in Property Tax Insider in May 2017.