Most landlords overpay tax. Section 24 worked end-to-end, when incorporation actually pays, and the MTD deadline now nine months away.
I went through three landlord clients’ tax returns last week. Between them they overpaid £11,400. Not because they did anything wrong. Because they didn’t know what they didn’t know. Allowable expenses missed. Section 24 calculated wrong. Replacement-of-domestic-items relief never claimed. The accountant did exactly what was on the form — nothing more.
Tax is the area where I see the biggest gap between what landlords think is happening and what’s actually happening. Section 24 still bites, six years after it landed. Quite a few higher-rate landlords still don’t fully understand that mortgage interest no longer reduces taxable income — it gets a 20% credit. Quite a few basic-rate landlords think they need to incorporate because someone on a Facebook group said so. Neither is right.
This issue is the most numerical we’ve done. Section 24 worked example with real numbers. A deal of the month where incorporation changes the math (and one where it doesn’t). The MTD deadline is now nine months away — pilot software is open and there’s no reason not to learn it now. The reader question is the question I’ve been asked most this quarter: should I incorporate?
Read this with your last tax return open. If you spot something you missed, refunds are claimable up to four tax years back. The exercise pays for itself the first time.
This is the property where the incorporation question actually matters — and the answer is more nuanced than you’d guess from internet forums. At a higher-rate income, personal-name ownership gives £1,940/year net. The same property through an SPV gives £2,310/year net after corporation tax and dividend extraction. That’s £370/year better in the SPV.
But the SPV costs roughly £2,400 in setup, accountancy uplift, and the 1% interest-rate premium on commercial mortgages. Break-even is around year seven, before you factor in CGT relief if you ever sell. If you’re holding for 15+ years and you’re a higher-rate taxpayer, the SPV wins comfortably. If you’re basic-rate or you’re selling inside seven years, personal name is genuinely better.
Kettering NN15: steady BTL postcode, demand from Northampton commuters, days on market 24, capital growth 3.1% last 12 months. EPC band C from a 2022 boiler upgrade, so no EPC overhang.
Priya, the honest answer is “maybe” — and the only way to get to a real answer is to run the actual numbers on your actual portfolio. Three things determine it: your long-term hold intention, your income tax band, and your gearing.
Incorporating four existing properties triggers SDLT (potentially with Multiple Dwellings Relief if you can argue partnership), and capital gains tax on the latent gains unless you qualify for partnership-to-company relief under Section 162 (which requires the portfolio to genuinely be a partnership running as a business, not just a collection of properties). A rough rule of thumb: SDLT and CGT combined on four geared BTLs purchased over the last 6–8 years typically lands around £30,000–£60,000. That’s the cost of getting in.
The annual benefit, on the numbers you’ve given me, is probably £1,800–£2,400/year after corporation tax and dividend extraction, depending on how much profit you draw vs leave in the company. Break-even on a £40,000 entry cost is roughly 18 years. That changes if you’re planning to add more properties (which compound the SPV benefit) or if you intend to leave profit inside the company to fund the next purchase.
What I’d do in your shoes: keep the four in personal name. Set up an SPV for any future purchases. Run the existing four to the end of their fixed-rate terms, then reassess. That gives you the SPV benefit on growth without the painful entry cost on the existing stock.
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