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How to Start a Buy-to-Let Business in the UK

By: Ed Smith


Red and white Now Leasing sign in front of a Rental Property.

Thinking of starting a buy-to let-business this year? While the economy may be in recession, there are still many opportunities within the property sector.

Buy-to-let properties can be potentially lucrative. However, there are a lot of things you need to think about before deciding if it is the right career for you. Here, you’ll discover some of the main things to factor in when starting a buy-to-let business in 2020.

Buying through a company vs buying individually

At one time, it was most common to purchase a property individually before renting it out. However, in recent years landlords have started to realise the benefits of setting up an actual buy-to-let business.

According to Simply Business, 64% of landlords who plan to buy this year and own four or more properties, will purchase the new property as a company. In comparison, just 21% will be buying as an individual.

Setting up as a limited company provides a number of benefits. Landlords get to avoid reductions in landlord tax relief which apply to individuals. It is also much easier to set up as a limited company and you can avoid capital gains by keeping profits within the limited company. These are just a few of the benefits you can expect to experience.

Understand the taxation of buy-to-let properties

When you purchase a property for buy-to-let individually, you are taxed a little differently than a limited company.

In April 2017, changes were introduced relating to landlord tax relief. It meant that a basic 20% tax reduction would be provided for either finance costs or property profits. What this means, is that landlords now need to declare their entire rental income, then pay income tax on it all before claiming back 20%.

Landlords who pay the highest rates have been most impacted by this change. This is one of the main reasons many have been setting up as a limited company.

However, before choosing to go down the buy to let business route, it’s important to understand its limitations and potential downsides. It won’t necessarily be the cheapest option for some landlords so this needs to be taken into account.

Things to consider

Setting up as a limited buy-to-let company is largely beneficial to those with four or more properties. If you own fewer than that, you could actually end up paying more through a limited company than you would as an individual.

As well as choosing between a limited company or individual business structure, you also need to consider the risks. It’s really important to have landlord’s insurance such as the policy offered by Arthur J. Gallagher. This will financially protect you against the challenges that can crop up along the way.

Overall, setting up a buy-to-let business in 2020 is a challenge. However, provided you plan ahead and understand the challenges you’ll face, it is possible to earn a lucrative income as a buy-to-let landlord.

Published: August 24, 2020

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Ed Smith

Ed Smith developed a keen understanding of business through his studies and early business ventures. He now looks to advise start-ups and is extremely keen to make sure every entrepreneur gets the advice which could make their business venture a success. He has been a guest author on various high authority business sites.

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