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Portfolio landlords urged to develop succession plan

by LLP Reporter
30th Aug 22 5:28 pm

More than a quarter of professional landlords (27%) have not yet developed a succession plan, according to Handelsbanken’s SME Landlord Survey Report 2022, which surveyed 120 professional landlords with at least four properties.

More worryingly almost a quarter – 23% – admitted it had simply not crossed their minds. Around one in five (19%) said that they had no one to leave their portfolio to, while 15% stated it is simply not a priority for them – with the same proportion saying the process was just too complicated.

The study shows that landlords with smaller portfolios are far more likely to have taken steps to protect their portfolio from estate tax liabilities: an overwhelming majority (96%) of landlords across all age groups with a portfolio of four or five properties say they have long-term succession plans in place, compared to just 52% with more than 10 properties, suggesting that those with higher value estates are less concerned about the tax liability facing the next generation.

Among all those with a clear succession plan in place, more than half (54%) plan to convert their portfolio into a property development portfolio to attract business property relief, while 43% are considering a charitable trust, which would enable the handover of business to their heirs with minimal tax exposure. Other popular options include family trusts (35%), family investment companies (28%) and acquiring agricultural properties to qualify for agricultural relief (26%).

Christine Ross, Head of Private Office (North) and Client Director at Handelsbanken Wealth and Asset Management, a subsidiary of Handelsbanken, said, “The success of buy-to-let over the past decade has created huge numbers of wealthy landlords – with a real need for dedicated financial and tax planning.

“Property investors with substantial portfolios often defer creating a wealth succession plan, but are prompted into action when considering the alternative – the need for their heirs to sell assets to meet the tax liability on death.

“A plan that includes the use of a family investment company or a trust may carry some initial tax cost, but if put in place early enough, has the potential to create far greater savings over the longer term.”

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