Meg Saksida considers the pros and cons of incorporating a rental property business.
Landlords who hold their business in a sole trader (ST) structure are very often tempted by incorporation. There can be so many advantages on top of the lower tax rate, and all are a great lure, but incorporation can also have some downsides.
Before incorporation is considered as the panacea to all the woes of the ST landlord, the complete list of cons must also be considered.
Lower tax rates and no interest restriction
Holding the properties inside an ST business will mean income tax rates of between 20% and 45% and capital gains tax (CGT) rates of 18% or 28%. This can be compared with income and gains inside a limited company charged to corporation tax at 19% until at least 2023, and even then, only those companies with profits over £250,000 will pay the higher 25%