A limited company is a separate entity and the tax rate is lower than the personal tax rate. You would need to consider the following expenses:
1. Stamp Duty:
Normally you are required to pay the stamp duty Tax. However, as you already formed a partnership, you probably do not need to pay the SD tax. It depends on meeting the following HMRC criteria:
- Normally you are required to submit your partnership tax return for minimum of 2 years.
- You would need to meet the definition of partnership ‘business’. Normally you need to spend more than 20 hours per week in dealing with your property business.
- Whether if the partnership formation is formal ( You would need a formal contract).
- Whether you are using the same name and right SIC code.
2. Capital Gain Tax:
You are also required to pay CGT when transferring the property. However, you can claim incorporation relief if you meet the criteria of partnership ‘business’.
3. Legal Fee:
There will be a legal fee involved when you transfer the ownership. You are also required to apply for mortgage which almost 1% higher than normal rate.
4. Early redemption fee:
If your property is on mortgage then your bank may charge you an early redemption fee.
Transferring a property ownership to a limited company is a highly technical area. HMRC has increased the number of investigations into this since 2015. We recommend purchasing HMRC investigation insurance if you choose option 1.