Buy-to-let landlords who actively manage their residential real estate businesses will be adversely affected by mortgage interest restrictions, beginning in the 2017-18 tax year, which progressively increase until the 2020-21 tax year when the full restriction takes effect. These new rules will have a negative effect on the current trading position. Profits could be significantly eroded once the higher tax burden is taken into account.

Other onerous tax changes introduced include the specific exclusion of investment property from the reduction to the main rates of capital gains tax. Landlords should consider reviewing their current ownership structure to see if it remains suitable for their needs going forwards.

Converting the property business to a company structure offers genuine commercial benefits as well as tax efficiencies where landlords are actively managing their substantial real estate portfolio. Through incorporating their real estate, landlords will be able to take advantage of Section 162 relief.

Every property business and portfolio is unique in terms of management style, value, outstanding mortgages and chargeable gains. Lancaster Knox can assist landlords to consider the changes that will be implemented over the coming years so they are structured in a way to reflect their future aims and aspirations.