If you own multiple properties you will be aware that since 2021 you can no longer claim tax relief on mortgage interest.
To mitigate this an option that some have taken is to own the property in a Ltd company. This still gives you corporation tax relief on the mortgage interest of 20% but not the 40% or 45% relief you had received previously. Also, you would need to move the property assets into the Ltd company. This move, however, would see you charged Capital Gains Tax on any increase in the value of the properties since you bought them and you would also have to pay stamp duty at the highest rate of up to 15%.
In addition, while Capital Gains tax dies with you, it is replaced by Inheritance Tax which is charged at 40% on anything over £325,000 (doubled for a married couple). There is additional relief of another £125,000 each, but this additional relief disappears if your total assets are valued at over £2.15 million.
THE SOLUTION
The good news is that there is a solution.
In a recent case, by making various adjustments we saved our client £1.2 million in Inheritance Tax and a total combined saving of £2208000. The cost of doing this was £15,000 in the first year and £10,000 in years two and three.
The client’s estate was valued at £4,600,000. The portfolio would have had Capital Gains Tax of £840,000 and Stamp duty of £368,000. This was without any of the legal fees needed to move to a Ltd company.
This is not a scheme, we do report it to HMRC and it’s the only process I know where we obtain pre-approval.
Before we embark on any planning, we write a suitability report to ensure any action prescribed is suitable for our clients.
If you would like to discuss your situation please get in touch. The initial meetings are paid for by us and we are happy to discuss the process with your existing advisers, your accountant, or your solicitor or both.
You can contact us here: https://beesandco.com/contact/
