Buy to Let Trends

Landlords with larger portfolios are increasingly moving to limited company status for new purchases, as restrictions to mortgage interest relief take effect. According to Precise Mortgages, 64% of landlords with more than four properties who plan to buy this year have said they will use limited company status, while 21% will buy as individuals.


In comparison, only 17% of landlords with smaller portfolios said they would use limited company status, and 37% favoured buying as individuals.


The growing popularity of changing business structure to limited company status has been attributed to the phased reduction of mortgage interest relief. This process is gradually eroding any higher rate tax relief landlords can claim on their finance costs, such as mortgage interest payments, and will replace it with a basic-rate tax credit by April 2020. This only impacts on the income tax liabilities for 40%/45% tax payers and has no effect on the tax liabilities for basic rate taxpayers.


The above tax change does not affect landlords operating as limited companies, who can continue to offset their full mortgage interest against profits.


The tax liabilities arising from personal or limited company ownership can be considerably different and, as it can be quite costly to change the basis of ownership once a property has been purchased, it is important to take individual advice at an early stage.


Lentells are able to advise on all aspects of property tax. For further information please contact your local Lentells office.