New research suggests that landlords are rushing to invest in the sector ahead of key buy-to-let tax changes.
As the 1st April Stamp Duty surcharge deadline approaches, many property investors are seeking to avoid the hike.
Landlords Rushing to Avoid Buy-to-Let Tax Changes
Meanwhile, more individual investors seem to have turned their lettings businesses into limited companies in order to be exempt from Chancellor George Osborne’s clampdown on the buy-to-let sector.
Limited companies accounted for 43% of all buy-to-let deals in January, up from 38% in December, according to specialist broker Mortgages for Business.
The total number of buy-to-let mortgage applications – by both individual investors and limited companies – increased by 27% in January from the previous month.
From 1st April, buy-to-let landlords and second homebuyers will be subject to a 3% Stamp Duty surcharge when they purchase a property worth over £40,000.
The Managing Director of Mortgages for Business, David Whittaker, explains how this is changing the market: “The increase is due to landlords trying to get as many purchases as they can completed before the Stamp Duty surcharge comes into effect on 1st April, after which I would expect transactions to return to more considered levels.”
Additionally, landlords face the forthcoming change to buy-to-let mortgage interest tax relief, which will be cut to the basic rate. However, limited companies operating lettings businesses are exempt from this change.
Whittaker comments: “Landlords have woken up to the fact that transacting via a corporate vehicle is a feasible option, and in many cases, the most prudent route going forward.
“I wouldn’t be surprised if the percentage continues to rise as landlords, especially those paying the higher tax rate, prepare for the forthcoming changes to relief on finance costs.”1
Have the planned changes affected the way you are investing in the buy-to-let sector?