Whilst Philip Hammond’s performance was the most entertaining of any in recent times (unless you were on Labour’s frontbench that is), the Spring Budget was about as thin as it gets.
Nothing much to write home about at all, with even the much decried rise in NIC for the self-employed and the lowering of the tax free dividend limit being arguably acceptable as a way of ironing out old-school inconsistencies.
The first real increase in the amount you can give away free of inheritance tax also goes up then by an additional £100,000, taking the amount to £425,000, but only if you own your own home etc.
No great shakes if you’re a landlord though (which if you’re reading this you most probably are); S24 is still here, and the pain starts on April 6th when the first reduction in mortgage cost deductibility takes effect (down to 75%).
Conclusion – keep calm and carry on; and, if you’re still thinking of incorporating to get round S24, don’t forget to take into account the following: –
- Your liability to capital gains tax and stamp duty if you can’t prove your entitlement to S162 incorporation relief (you must be working 19-hours a week or more in the business or pull the wool over HMRC’s eyes via a temporary LLP).
- Upfront remortgage costs such as early redemption charges, brokers fees, lenders fees, and legal fees.
- Most lenders won’t lend to limited companies, and none are keen on so called ‘beneficial interest company trusts’ as they fundamentally weaken their ability to pursue the debt.
- Significantly reduced choice of lenders and higher interest rates.
- Lenders will mostly require a personal guarantee (if the company goes bust you remain responsible for the debt).
- Lenders will take a debenture (legal charge) over the company’s balance sheet, which restricts your ability to make best use of your director’s loan account if at all.
- You’re tied in to the first lender and their appetite for further lending if any, meaning that each new acquisition or remortgage may need a new lender and a new company.
- A limited company is fully visible to HMRC and subject to corporation tax, dividend tax, income tax, and national insurance.
- It’s almost impossible to mitigate inheritance tax (40%) without expensive (at every stage) and ultimately uncertain ‘opinion-based’ trusts, meaning that your heirs may have to break up your hard work just to pay the tax bill.
If you would like to explore your own portfolio and personal circumstances in more detail, you can request a free consultation here.