I currently own a flat in London (mortgaged) in my sole name and wish to convert this to a joint buy-to-let mortgage with my wife when my fixed term expires next year. I am due to inherit my parents’ house, which is mortgage-free, and I want to convert this into two flats. So, in the space of 12 months, I’ll own three flats. What’s the best way to mitigate my tax burden? Is it to transfer them all into a limited company (I’m aware of the potential costs associated), or should I set up a property management company and have the rent paid into that? My wife and I are both higher-rate taxpayers. 

Arthur Weller replies:  

A property management company can help to some extent, but its effect is limited. To be allowable for tax purposes, it must charge a 'commercial' rate for its services. The going rate for property management is between 10% and 15%. This would still leave a lot of property income in your personal hands. As has been mentioned before, you may wish to consider the 'rent to rent' strategy. Basically, this means renting out your properties for a small amount to your company and then your company subletting the properties to the actual tenant for a commercial rent. You should speak to a tax adviser before considering this strategy further.