Advice for Landlords

Affected by Covid-19? Immediate Rescue Or Closure Options Available

FAST Free Director Advice & Support, With 100+ offices Nationwide our Licensed Insolvency Practitioners can Help Today.

Updated: 8th February 2021

How is the tax treatment of buy-to-let properties changing?

The changes facing the tax treatment of buy-to-let landlords are now just around the corner. Announced in 2015 by the then Chancellor, George Osborne, the new rules will see landlords having to pay tax on their entire turnover, rather than just on their profits.

As it currently stands, tax is due on the difference between the rental income you receive and the mortgage interest you pay at your highest rate of income tax. From 6 April however, mortgage interest tax relief will gradually start to be cut back. Between 2017 and 2020, this will be cut to 20pc, meaning tax will be due on the full amount of rental income received, less 20pc tax relief. In effect this means all higher and additional rate taxpayers, who fund their buy-to-let properties with mortgages, will be taxed considerably more.

Changing to a limited company structure

To combat this, thousands landlords have made the decision to move their buy-to-let properties into a limited company structure in an attempt to lessen the impact of these changes. In fact, in excess of 100,000 properties were bought by landlords within limited companies last year.

Switching to a limited company structure could prove to be a money-saving exercise for many. By running their property portfolio through a limited company, landlords would be subject to different tax rules. They would be exempt from having to pay income tax on their rental income, and instead would be liable for corporation tax. Corporation tax is currently 20pc, but this will drop to 19pc in April 2017 and will fall further to 18pc by 2020. As an added bonus, limited companies can off-set certain costs of running their buy-to-lets as 'allowable expenses' – this includes things such as mortgage payments, wear and tear on the property, and administrative costs such as letting agency fees.

What are the downsides?

While for some landlords there is considerable appeal in setting up as a limited company, this will not be the best move for all. As a company director there are additional legal responsibilities including submitting your corporation tax return, self-assessment tax return, company accounts and setting up a PAYE salary scheme.

Furthermore the choice of mortgage providers may be reduced once you are a company looking for a loan rather than an individual. With choice of mortgage lenders reduced, the deals open to you may be less competitive in terms of interest rates and set up fees which may eat into any profits you stand to make.

With more landlords than ever before now becoming company directors, what is the advice if it all goes wrong?

If you find yourself in this position then there is obviously a lot for you to think about. You may have particular concerns about the properties you own, and how your current financial struggles may impact on these. You also have the position of your tenants to consider.

Whether your business is suffering due to uncertainty regarding your tax position in light of the new arrangements, struggling to keep up with the mortgage payments on your properties, or being financially impacted due to unpaid rents, or vacant properties, the message is to seek professional advice as soon as possible.

A licensed insolvency practitioner will be able to assess your situation and help you decide on the best course of action going forward. We can provide assistance in all manners of business difficulties, and can help you with all aspects of company rescue and recovery.

We have an extensive network of 100 offices offering confidential director support across the UK.

Keith Tully


0800 644 6080
Director Support - Business suffering from Cash-Flow Problems?
If your company is financially distressed, we also offer the below services:
Business debt recovery

  • Recover Unpaid Invoices of £5k+
  • Expert Credit Control Services
  • Stop Late Payers & Bad Debts
Visit Site
Time to pay experts

  • Get Breathing Space with HMRC
  • Support with Business Tax Arrears
  • 35 Years HMRC Negotiation
Visit Site
UK Business Finance

  • Rejected for a CBILS Loan?
  • Get Emergency Business Funding
  • Supporting 1000+ UK Companies
Visit Site
Who we help
  • Company Directors
  • Finance Directors
  • Sole Traders
  • Accountants
  • Small Businesses
  • Large Businesses
  • Partnerships
Contact our team
Jonathan Munnery
Gillian Sayburn
Julie Palmer
or Find your Nearest Office

Here at Real Business Rescue we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Business Rescue Advice for Directors
Free Guide for Limited Company Directors
Business Rescue Advice for Directors
  • How to manage company cash flow problems
  • Advice on dealing with HMRC
  • Understanding rescue and closure options
  • And much more...
Free Guide Download
Dealing with your Insolvent Clients
Business Rescue Guide for Accountants
Dealing with your Insolvent Clients
  • Helping you advise insolvent clients
  • Spotting signs of client distress
  • Exploring business rescue options
  • And much more...
Free Guide Download
Our numbers speak for themselves
Number of UK Offices
Directors Helped
Licensed Insolvency Practitioners

This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY