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Registring a holding company for the property management business

Forming UK Holding Company

Registering a holding company for the property management business: prior to the economic downturn, rising house prices coupled with a volatile stock market, as well as uncertainty regarding private pensions, led many people to invest in property. A lack of social housing on a scale not witnessed in decades has seen many property investors become landlords to multiple tenants across a wide portfolio of homes and apartments, and many of these investors have neglected to consider the benefits of registering a holding company for their property management portfolio.

Essentially, the registration of a holding company can help to alleviate certain taxes. Starting a holding company (or a limited company) for a property portfolio can often reap huge rewards as far as taxation goes - corporation tax rates are drastically lower than personal taxes, and taxes on rental profits can even be as low as zero.

Those paying higher rates of tax can benefit enormously. The most noticeable benefit of registering a holding company for your properties is that the initial £11,000 of profit is completely tax free, as per tax threshold legislation. To put this into perspective, a holding company would pay zero tax on a profit of £9,000, whereas HMRC would expect somewhere in the region of £3,500-£4,500 from a sole trader paying higher rate tax.

Once a holding company has been registered, it's possible for ownership to be transferred without having to incur any capital gains tax liability. Provided these properties are inside a limited company, its possible for family members to receive shares, thus allowing for property ownership to pass to an individual completely tax free, because the value of the property transfer may be held over for the purposes of capital gains.

Holding companies may also pay out profits as dividends, which are currently exempt with regard to National Insurance contributions. Whilst there is extra tax to pay should any dividends be extracted, a holding company can work as a tax shelter provided you can afford to continue re-investing profits over the years.

Of course, it can be difficult to know where to begin in terms of registering a holding company, particularly for those who invested in property as a fail-safe without having much in the way of business experience. As experts in business start-up, Coddan Formations Agency are on hand to provide all the information you may need, taking property owners through each step in an easy-to-understand manner, facilitating landlords to reap the tax reductions afforded by registering a holding company in the Great Britain.