However, the research found that so far only one per cent had actually incorporated, which the NLA says can be explained by the high cost of transferring property held personally into a company.
The findings also show that 31% have no intention of moving their portfolio to a limited company, and that 29% still unsure about whether they will incorporate or not.
Mortgage interest relief for individual residential landlords, which will be restricted to the basic rate of income tax (20%) by 2021, will begin to be phased back from April 2017.
The changes will mean that landlords will no longer be able to deduct the cost of mortgage interest before declaring their taxable profit, and will instead receive a tax credit of 20pc of their mortgage interest costs.
The NLA has labelled the changes the Turnover Tax, because landlords’ tax will be calculated on rental income they earn, rather than their profits, forcing many basic rate payers into a higher bracket and leaving higher and additional-rate payers with considerably bigger tax bills.
Landlords structured as companies will be exempt from the changes, instead paying corporation tax – currently 20 per cent – on their profits alone.
Richard Lambert, Chief Executive Officer at the NLA, said: “Transferring personally held property to a limited company isn’t a straightforward process, so it’s not surprising that so few have taken this action so far.
Landlords need to do their research but many will realise that incorporating simply doesn’t stack up financially; doing so will incur capital gains and potential stamp duty charges, which means the process may be prohibitively expensive”.
Richard Price, Executive Director of the UK Association of Letting Agents (UKALA), said: “While just one per cent have incorporated so far a significant proportion are still considering the move.If landlords follow through with these intentions then it’s likely that more and more will take a hands-on approach to managing their portfolios in the future, which would mean less business to go around for agents, and certainly less of a need for full service offerings.
The changes to taxation are forcing landlords to re-evaluate their businesses and their place in the market, so our advice for agents is to begin talking to your clients about their intentions over the next few years, and consider how you’ll meet their changing needs in a way that is distinct from your rivals’”.
