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Landlord Tax Planning - MB Estate Planning

Landlord Tax Planning

Residential let property has been a very popular investment for many families over the last 30 years.

This type of investment is a reliable source of income for your family, whether you have a single rental property or a large portfolio with many letting units.

The big problem with residential let property comes when you get older and start to think about passing your portfolio to the next generation of your family.

Unfortunately there are not many tax breaks for simply transferring a portfolio of residential let properties to other family members and a number of other risks.

  • If you die, any let property above the value of your Nil Rate Band will be taxed at 40%.
  • If you sell, you will be taxed at up to 28% on any increase in value since you bought it.
  • If you transfer it to a family member, there may be both stamp duty and capital gains tax liability.
  • What hapens if that other family member gets divorced or declared bankrupt?
  • What happens if a family member needs long term care?

The portfolio of investment property that you have spent decades building may have to be sold just to pay the tax bill or care fees.

How Much Tax?

Case study: Mr P.

Mr P. is a taxi driver who has, through many years of hard work built up a portfolio of houses that are let to students.

He has 18 houses with an average value of £385,000 for a portfolio value of £6.93 million at 2020 prices.

When he dies, his family will have to find £2,772,000 to pay the Inheritance Tax Bill!

I have dealt with this family for many years and know that although they enjoy a good income from their investment they do not have nearly £3 million in cash sitting around to pay inheritance tax.

What Can be Done?

If you have 4 or more residential let properties and are a professional landlord. Which means that you actively work on your property business rather than leaving everything to agents, then we can transform your property portfolio into a much more tax efficient form.

The process takes place over a three year period and by the time we are finished working with you your portfolio can be:

  • Free of Inheritance Tax
  • No large Capital Gains Tax bill
  • No Stamp Duty
  • Reduce or eliminate risks from long term care, divorce, etc.

This type of portfolio transformation will save your family hundreds of thousands or even millions of pounds in tax compared to doing nothing.

Find Out If You Qualify

There are a number of conditions that need to be satisfied for this type of planning to be successful and not all portfolios qualify.

The first step is to conduct an assessment of your portfolio, we will then be able to advise whether or not this type of work will be suitable for you, there is no fee for this.

Even if your portfolio doesn’t fit this kind of planning today, there may be other types of planning that can help reduce your potential tax bill.

Get in touch today to book a free consultation.