Property Trading and Development
Ensuring your property investment portfolio is tax-efficient to protect your bricks and mortar assets.
Getting advice from financial experts on property taxes can help you structure your investments in a manner that allows your current and future property development plans to be tax efficient, sustainable, and compliant.
When trading through a company as well as limiting liability instead of trading in their own name or through a partnership, profits will only be liable to corporation tax, not income tax. Corporation Tax has a much lower rate of 20% compared to income tax of 40% or 50% for a trading business and on any rental income, or capital gains tax (CGT) of 18% or 28% for an investment business.
Any employee or officer of a trading company who owns 5% or more of the ordinary voting shares for more than a year, or are disposing of a partnership share may be eligible for Entrepreneurs’ Relief. As part of this relief scheme, they would only be subject to a 10% CGT on the sale proceeds rather than 28% once they decide to sell the shares.
Forming a Limited Liability Partnership (LLP) with a company and making that company one of the partners is a common tax planning technique to reduce or defer tax liabilities. It’s important to seek advice from experts to figure out exemptions, and to make sure Stamp Duty Land Tax is considered, which can be 15% of the price of £2 million-plus residential properties.