The 2024 budget has brought changes for landlords, making it more important than ever to carefully plan your property portfolio and exit strategies. Whether you hold assets personally or through a limited company, understanding the legal implications of selling and the opportunities for structuring your investments is critical. At AST Hampsons, we work closely with landlords, accountants, and financial advisers to ensure a smooth and successful process, tailored to your goals.
The 2024 Budget: Challenges and Opportunities
With the Stamp Duty Land Tax (SDLT) surcharge on additional properties rising by 2% in respect of each bracket going from 3% to 5% at the lowest range, the costs of acquiring new buy-to-let properties have increased. Meanwhile, Capital Gains Tax (CGT) on residential properties remains unchanged, but other investments are now subject to higher rates. These changes may prompt many landlords to reassess their portfolios or consider an exit strategy.
It’s worth noting that tax advice plays a crucial role in any property transaction. While AST Hampsons can guide you through the legal process, we strongly recommend consulting a qualified tax adviser to ensure your plans align with your financial objectives. We can also connect you with trusted professionals if needed.
Asset vs. Share Sales: Choosing the Right Approach
For landlords operating through a limited company, a key decision when selling is whether to sell individual properties (asset sale) or the company itself (share sale). Both options have distinct advantages and considerations:
a) Advantages of a Share Sale
- Cost Savings for Buyers: Buyers of company shares pay Stamp Duty or Stamp Duty Reserve Tax at a rate of 0.5%, a fraction of the SDLT rate on direct property purchases. This can make your offering more attractive to prospective buyers.
- Flexibility with Mortgages: In a share sale, existing loans secured against the company’s properties typically remain in place. This avoids the immediate need for refinancing, although the buyer may renegotiate terms post-sale. If you, as the seller, have given personal guarantees, you’ll likely want to secure a release as part of the transaction. Without this, you could remain liable for company debts even after the sale. If a release isn’t possible, clearing the company’s mortgages on completion may be necessary.
- Streamlined Transactions for Larger Portfolios: For buyers seeking a portfolio, acquiring a company avoids the need to transfer individual properties, simplifying the process.
b) Considerations in a Share Sale
- Due Diligence: Buyers will scrutinise the company’s financial history and legal obligations. Any liabilities—such as unpaid taxes or disputes—could impact the sale price or lead to complications.
- Complexity: Negotiating a share sale involves a more intricate legal process than selling properties outright. This makes professional advice essential to protect your interests.
c) Selling as an Individual
Individual landlords generally sell properties outright, requiring the repayment of associated mortgages upon completion. While simpler, this approach lacks the potential tax efficiencies and flexibility of a share sale.
Planning Your Exit Strategy
Deciding how to exit a property investment is as important as planning the acquisition. Whether you’re seeking to retire from the rental market or reinvest in other opportunities, having a clear strategy ensures you maximise the benefits of your hard work.
Key considerations for your exit plan include:
- Legal and Financial Advice: Selling properties, particularly through a company, often requires collaboration with solicitors, accountants, and financial advisers. At AST Hampsons, we work closely with these professionals to create a seamless process and can recommend trusted advisers if needed.
- Post-Sale Plans: After a sale, you may need to explore options for reinvesting proceeds or managing liabilities, such as personal guarantees. Our team can introduce you to mortgage and financial brokers to assist with refinancing or planning your next steps.
- Portfolio Transfers: For landlords holding properties individually, transferring them into a limited company might reduce tax liabilities over the long term, but it’s important to weigh this against the upfront costs of SDLT and CGT.
A well-planned exit strategy ensures that your sale is not only legally compliant but also aligned with your financial goals.
How AST Hampsons Can Help
At AST Hampsons, we provide expert advice to landlords and property investors, offering tailored support to meet your needs. Whether you’re selling assets, considering a share sale, or exploring the portfolio transfer into a company, we’re here to help.
Our services include:
- Legal expertise in share and asset sales, ensuring all aspects of the transaction are handled smoothly, from due diligence to personal guarantees.
- Collaboration with your financial team: We work hand-in-hand with accountants, financial advisers, and mortgage brokers to ensure every part of your sale or transfer is professionally managed.
- Access to trusted professionals: Need tax advice or help securing new financing? We can connect you with experienced advisers and brokers to complement our legal services.
- Comprehensive support for exit strategies, helping you achieve your goals with minimal stress.
Based in Rochdale and Bury, our team has decades of experience guiding landlords through complex legal processes. Whether you’re managing a single property or a large portfolio, we’ll help you navigate your next steps with confidence.
Take the Next Step with AST Hampsons
Whilst we are yet to see the full impact of the 2024 budget on the buy-to-let market, it is bound to have an effect making it essential to approach property transactions with a well-informed strategy. With AST Hampsons by your side, you’ll have the legal expertise and professional network to make your plans a success.
Contact us today to discuss your goals and how we can assist. Together, we’ll ensure your investments are structured for success—whether you’re expanding, selling, or planning for the future.