If you have put some of your investments into buy-to-let and created a company to manage that investment Enables’ IFA’s in Bishop’s Stortford can see it is very disappointing to have to face some of the recent changes outlined in the chancellor’s recent budget.
Companies do not currently pay corporation tax on profits from capital gains driven by inflation. The relief has meant businesses were only taxed on real gains. But the business capital gains regime will be brought into line with the rules for individuals, in a move designed to discourage the use of companies as investment vehicles, by large buy-to-let landlords.
Buy-to-let landlords who own homes within a company will face a higher tax bill when they eventually sell their properties. But the scrapping of corporation tax relief on capital gains linked to inflation are unlikely to be felt for a number of years. “The CGT avoidance technique of using a company that holds UK property instead of selling the property itself looks set to be shut down.” Said Tim Walford-Fitzgerald, private client tax partner at HW Fisher & Company.
The Budget also targeted buy-to-let landlords who have set up as business enterprises, by freezing the indexation tax relief. Meaning indexation relief applied to landlords who have owned a property for many years, and allowed gains to be reduced based on the length of ownership will change. This relief will be frozen from January 2018.
According to Ray Abercromby, of Smith & Williamson the clampdown could be the beginning of an attack on assets held in companies, “Recent buy-to-let reforms have resulted in a more commercial housing industry with many of the smaller holders leaving the market and larger holders incorporating.” He said.
Issued by: Enable Independent Financial Life Planners • 25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 – Fax: 01279 657339 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE