Increasing number of buy-to-let landlords set to become limited companies

Buy to Let

An increasing number of landlords are set to look to take advantage of the chance to set themselves up as limited companies this year as they are faced with yet more taxation changes and related concerns.

There was a quick rise last year in the number of landlords becoming limited companies after the change in Stamp Duty rules meant that anyone not investing as a company would face having to pay three per cent levies on any purchase they made for rental homes, over and above standard Stamp Duty.

And this is set to become even more of a trend in 2017 as landlords look to make themselves even more tax efficient in the face of mortgage tax relief changes that are going to mean not being able to deduct mortgage interest from taxable income.

Data from Mortgages for Business show that by the end of 2016, some 6 per cent of all applications for buy-to-let mortgages were coming from limited companies rather than individuals. This was some six per cent higher than in the three-month period that came before, and the start of what is likely to be a trend continuing this year.

Before the government had started bringing in the raft of tax changes that started this move towards limited company status, in fact, only 21 per cent of all applications came from those who were operating as limited companies, showing how sentiment has changed and practices have adapted to fit in with legislation.

“The sharp increase in purchase applications made by landlords using a limited company structure is unsurprising given the financial incentive to do so, and it is encouraging to see growing numbers of landlords approaching their investments intelligently,” said Mortgages for Business managing director David Whittaker.

“With the changes to tax relief set to be phased in from April 2017, this trend is unlikely to be reversed any time soon. Although many mainstream lenders do not yet have an offering for investors using limited companies, many smaller lenders have significant expertise when it comes to servicing this part of the market,” he added.

From Rentman