Transferring a property to a limited company

The advantages and disadvantages of selling your property to your limited company

Following changes to income tax relief for landlords in April 2020, many landlords have found themselves pushed into higher rate tax bands and are seeing a significant increase in cost. As a result, transferring a  property to a Limited Company has, for many, become far more cost-effective than owning property as an individual. In this blog, we explain how you can transfer your property to your limited company and what that could mean to you. If you haven’t yet started a limited company and want to know more about how they work, please see our blog posts on Buy to Let Special Purpose Vehicle (SPV) Limited Company Conveyancing for the benefits of purchasing property under a limited company.

You may want to try our Stamp Duty Calculator for a Limited Company Property Purchase

What are the advantages of owning property as a limited company?

Instead of paying income tax on your rental income, if you own the property through a limited company you would not need to pay income tax and you would pay corporation tax instead. At the time of writing, businesses pay corporation tax on their profits at a rate of 19% – significantly less than the 40% income tax that higher rate taxpayers are paying. You may be able to use the equity you’ve already built up in your property as your deposit for the limited company purchase. This could be recorded as a director’s loan, which you would be able to claim back later, and could therefore prevent you from having to finance a whole new deposit.

How do I sell my property to my limited company?

The process will be relatively similar to any other transfer of property, which means that legal fees, stamp duty and capital gains tax may be payable. Find out more in our blog on limited company conveyancing here. You can get an instant online conveyancing quote for a limited company transfer here on our website, which includes information on stamp duty and disbursements.

How will Stamp Duty Land Tax be calculated if I transfer my property to my limited company?

When transferring a  property to a Limited Company, you are free to transfer it for whatever price you wish; even as low as £1. However, keep in mind that Stamp Duty Land Tax (SDLT) will usually be calculated based on the full market value of the property, not the price it is purchased for. At the time of writing, corporate bodies are charged 15% SDLT for property purchases worth over £500,000. However, there is a relief available for property businesses that abide by certain conditions – we recommend that you speak to a qualified tax advisor for more information.

Will Capital Gains Tax be payable if I transfer my property to my limited company?

Likewise, regardless of the price you transfer your property to your limited company for, you may still need to pay capital gains tax – this is because as a director of the company, you are considered a “connected person.” Speak to a tax advisor before you proceed to ensure you fully understand your tax liabilities before making a decision regarding the transfer of your property.

Can I keep control of my limited company and transfer my property to it?

Yes – contrary to common belief, you can transfer your property to a limited company you are the sole owner of. There is no need to have your limited company owned by a third party. This is because your limited company is considered an entirely separate legal entity from you, even if you are its only shareholder and director.

Does my limited company have to be trading to own property?

Your limited company does not need to be trading in order to own a property. Limited companies that do not trade are considered “dormant” by the HMRC and can remain dormant for an unlimited period of time, but the directors must still fulfill their administrative requirements.

Will I need more than one solicitor?

This will depend on how your limited company is owned. If your limited company has directors and/or shareholders other than yourself, one solicitor will not be able to act on both yours and your limited company’s behalf due to the risk of a conflict of interest. However, if you are your company’s sole director and shareholder, one solicitor may be able to handle the entire transfer.

What are the disadvantages of owning property as a limited company?

There are some drawbacks to transferring your property to your limited company, however. Firstly, mortgages could pose a problem. If you have an existing mortgage on your property, there could be early repayment fees to be paid. Additionally, if you want to obtain a mortgage for your property under your limited company, you’ll only be able to obtain a limited company mortgage, which can often come with far more expensive rates. Even if your limited company only exists to own property, there will still be administrative tasks that need to be taken care of, either by a director or a hired accountant. Failing to complete them is a criminal offence and could result in a fine, or having your limited company struck off. Taking out your rental income could pose a tax risk too, as they would need to be extracted as a dividend. At the time of writing, you have a £500 tax-free allowance regarding dividends, but anything over this amount could be liable for income tax – Taxed at 33.5% on income within the higher rate tax band.

How Starck Uberoi Solicitors can help

At Starck Uberoi, we balance efficiency with attention to detail in order to provide the best quality service possible. We are trusted lender panel solicitors on the majority of limited company lenders [See list below]. To book an appointment, please call 020 8840 6640 or email solicitor@starckuberoi.co.uk.

Our Brentford Solicitors, are located on the High Street in a grand three-story building, just a short distance from Brentford County Court. Our Belgravia solicitors are located Just a 5 minute walk from Victoria tube station in Grosvenor Gardens. Our Ealing solicitors are only a short walk from both Ealing Broadway and South Ealing and our Richmond Solicitors have the pleasure of overlooking the picturesque Richmond Green.  Finally our Solicitors in Canterbury are located in the within the UNESCO World Heritage Site of Canterbury Cathedral.

Our partner, Raminder Uberoi, can also offer a Notary Public Service at any of our London offices.

Panel Solicitors: Limited Company Company Lenders

• State Bank of India
• Kensington Mortgages
• MOLO 
• The Mortgage Lender
• Foundation Home Loans
• CHL Mortgages
• Hampshire Trust Bank
• The Mortgage Works
• Aldermore
• Together Money
• Paragon
• Cambridge and Counties (sole rep)
• The Nottingham
• Skipton Building Society
• Fleet Mortgages