More Landlords Using Ltd Company Structures

Published ¤ 13/10/2017 09:07:18

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A growing number of landlords are turning to corporate structures in an effort to reduce tax liability and avoid stringent new rules on mortgage affordability, according to fresh research.

New data from Mortgages for Business reveals that 79% of all buy-to-let purchase applications were made via a corporate vehicle in the third quarter of this year, up from 73% of applications in Q2 2017 and just 21% prior to the tax relief changes being announced by the now former chancellor George Osborne in the 2015 Budget statement.
Given that the number of products available to limited company borrowers is continuing to grow, with limited company rates now at a record low, it is perhaps unsurprising to find that mortgage activity by landlords using limited companies remained high generally throughout the quarter.
Limited company transactions for purchases and remortgages made up almost half - 48% - of buy-to-let completions in Q3 by number of mortgages, and 47% by value of lending.
The increase in the use of limited companies by landlords for their borrowing needs is also reflected in the statistics held by Companies House which show that there was a spike in registrations for Special Purpose Vehicle limited companies (with property related SIC codes) in 2016.
Paul Skinner, mortgage expert from PKS Property Services, said "The number of landlords using SPVs has been increasing steadily since 2008, although the last couple of years has seen the strongest growth. Much of this must be put down to the new harsher tax environment for landlords. Limited Company structures offer tax efficiencies and softer affordability testing, plus the number of mortgage products available to SPVs has improved massively over the last 2 years.
"It must be remembered though, that although there are some benefits to holding property in a SPV, it may not be right for all landlords. It is essential that landlords take professional tax and finance advice."
If you are a landlord and need to discuss your situation, please call PKS on 01256 701205, or drop us a message by clicking here.
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