Property Management Companies

Ownership Structures and Tax Free Personal Allowances

By far the simplest way to own a property is to purchase it in your own name. However, trusts and non UK resident companies can have significant Income and Inheritance Tax advantages.

Against this the government have introduced additional taxes for properties that are owned by non natural persons and/or valued in excess of £2million. They have also proposed the extension of capital gains tax to properties owned by non natural persons (broadly but not exclusively non resident companies and trusts) even if the ultimate owners are not resident in the UK.

Restricted and unrestricted property finance cost 

The tax relief that landlords of residential properties get for finance costs is being restricted to the basic rate of Income Tax. This is being phased in from 6 April 2017 and will be fully in place from 6 April 2020.

How the tax reduction is worked out
The reduction is the basic rate value (currently 20%) of the lower of:

finance costs - costs not deducted from rental income in the tax year (this will be a proportion of finance costs for the transitional years) plus any finance costs brought forward
property business profits - the profits of the property business in the tax year (after using any brought forward losses)
adjusted total income - the income (after losses and reliefs, and excluding savings and dividends income) that exceeds your personal allowance

The tax reduction can’t be used to create a tax refund.
Read our article about finance cost

Professional advice should therefore be sought about how to structure the ownership of UK property.

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