Landlords planning to transfer their properties into a company to avoid recent tax changes are being warned of the dangers.
In a bid to cool the market, Chancellor George Osborne has introduced new taxes – and his 20% cap on mortgage interest relief is causing the most anxiety in the buy-to-let sector.
The cap will force basic rate taxpayers into higher taxes and leave higher-rate taxpayers with substantially larger tax bills, as more rental income will be exposed to income tax. 
Many landlords may be thinking of migrating to companies to avoid the change – but such a move is fraught with hidden dangers, according to accountants Bishop Fleming’s head of tax Andrew Browne.
Mr Browne, pictured, said: “Rushing ahead with transferring personally owned properties into a company can seem like a great way to save higher-rate tax.
“But it’s not always sensible and may be prohibitively expensive in terms of capital gains tax, stamp duty, other taxes, and the re-mortgaging costs.
“Even if properties are transferred, tax will only be saved if the money is left in the company. If you take it out, you will have to pay the new dividends tax.”
He said there were many ways of managing the changes, including only putting new properties into a company and keeping the rest personally, reducing borrowings and bringing family members into the business.
“All of these require very careful thought,” he added. “For many affected by the tax changes, doing nothing is not an option and seeking professional advice is essential to avoid costly mistakes,” he added.
Bishop Fleming has offices in Bristol, Bath, Exeter, Torquay, Plymouth, Truro and Worcester.
