The latest Mortgages for Business’ Limited Company Buy to Let Index shows that a rising number of landlords are looking to incorporate to overcome tax alterations.
Additional Stamp Duty charges for buy-to-let purchases, the phasing out of income tax relief and other changes saw the number of investments from limited companies rise in the final quarter of 2016. These purchases increased by 6% when compared to Q3.
This figure is substantially higher than the 21% seen before the alterations to tax relief were unveiled in July 2015. This shows that a rising number of buy-to-let landlords are taking action to avoid being stung by the greater tax costs facing them.
By incorporation, landlords can still offset finance costs against rental income.
David Whittaker, managing director of Mortgages for Business, noted: ‘The sharp increase in purchase applications made by landlords using a limited company structure is unsurprisingly given the financial incentive to do so and it is encouragingly to see growing numbers of landlords approaching their investments intelligently.’
‘With the changes to tax relief set to be phased in from April 2017, this trend is unlikely to be reversed any time soon,’ he continued.
Rise in limited company applications recorded
Despite the growth of the number of applications made via limited companies, lenders catering to this market remained static between the reporting periods. Only 14 offered products to limited companies.
Mr Whittaker concluded by saying: ‘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.’