Buy to Let Landlords property income continues to increase

Buy to Let Landlords property income continues to increase

The total property income declared by unincorporated landlords in 2021-22 was £48.8bn, up from £46.3bn the previous year according to HMRC figures.

The data also showed that 2.79m landlords filed self assessment tax returns, with the overwhelming majority having just one buy to let property. There were also 300,000 partnerships with rental properties, earning £6.17bn.

The total income from UK property increased by 10% in the five years from 2017 to 2022, driven by an increase in average income to £16,700, as well as the number of landlords increasing by 100,000.

While the majority of landlords in the past have bought property directly, research now indicates that three-quarters of landlords who now intend to purchase a new rental property will use a limited company structure to reduce their tax bills.

Buying via a limited company structure offers a number of tax benefits. The main advantage is that limited companies can deduct mortgage interest from company income and pay corporation tax rates, rather than an individual landlord’s personal income tax rate. Depending on profits the corporation tax rate is 19% for those with profits under £50,000, rising to a standard rate of 25%.

In recent years, a raft of tax changes has increased the tax liabilities of individual landlords who rent out residential property.

The capital gains tax (CGT) payable was also increased when the landlord sells a residential property (8% higher). A stamp duty land tax surcharge of 3% was also introduced on property purchases. Higher rate income tax relief for buy to let loan interest has also been removed.

If you are thinking of buying a property to rent out, please get in touch with us here at Kennedys Accounting, not only can we offer the appropriate tax advice, but also introduce you to mortgage brokers who are experienced to assist with limited company buy to lets.