The following article was written in July 2013. Since that time, the Government has introduced various changes to the tax legislation, in order to discourage private landlords operating in the buy to let sector. These changes include higher SDLT rates on acquiring a “second home” restrictions on tax relief for borrowings and higher CGT rates on residential property.
This has led to increasing interest amongst individual landlords in the question whether it is worth incorporating. Although companies are also subject to the higher SDLT rates, they are not affected by the interest relief restrictions, and they are taxed at lower rates, both on rental profits and capital gains.
There is a special CGT relief for incorporating a business. In the context of buy to let incorporations, it is crucial that the properties are held as business assets rather than as an investment – and the two are not necessarily the same thing.
(This article can be downloaded in pdf format at Academia.edu.)