78% of BTL purchases now for Limited companies

Hello all

Coming back to the headline "78% of BTL purchases now for Limited companies" this is a statement by Mortgages for Business, who have reviewed their own in house application data for mortgages that they have set up on a Business BTL basis. It is not an absolute representative overview of the market.

Let's re-consider S24 and who it is going to affect.

In short - higher rate and additional rate taxpayers. People who probably own three or more properties.

With the 20% tax credit brought back in to tax equation, basic and non rate tax payers are hardly affected at all (of course there's the wear and tear allowance issue etc), but the main tax 'scare mongering' remit that has been bashed on every landlords head (including the basic and non tax payer) is simply a headline too far.

Mortgages For Business are a great brokerage (nearly as good as mine 🙂 ) but one Brokers headline is to be taken simply as that.

We have also seen a huge increase in Ltd Company borrowing for the more prolific investor, although we are having serious and proper conversations with people who are waiting for another year or so before they make any radical moves.

There are still too many people jumping on the Ltd Company bandwagon without first taking specialist tax advice, and I strongly recommend that a rational discussion with a property / landlord tax expert is carried out before any new strategies are employed.

It's not right for everyone.

For those who are better off as a Ltd Company borrower, the lenders are recognising this hike in trend and there are mortgage products available via specialist BTL Brokers (such as my Firm) where the rates and fees are exactly the same irrespective of whether the application is in an individual name or Ltd Company name, so product comparison is not always a factor.

Reply to the comment left by "Howard Reuben" at "09/07/2017 - 09:15":

"Let’s re-consider S24 and who it is going to affect.
In short – higher rate and additional rate taxpayers."

You're having a laugh Howard.
What about the basic rate taxpayers who will be pushed into the higher rate?
What about the basic rate taxpayers who look at S24 and think the same 'logic' for it could equally be applied to them?
What about unencumbered landlords who look at S24 and think the same 'logic' for it could equally be applied to the cost of renewing a boiler?
What about the effect on tax credits, child benefit, student loans, bursaries, pensions?
I don't think you understand the scale of this or how landlords view it and they are reacting accordingly.
Only 1 in 5 affected? Yeah right.

Thanks for your reply Monty.

I'm not a Tory politician who said it would be 1 in 5, so a little unfair to throw that one at me.

I am however, someone who wears two hats, as follows;

1) for 15 years I have been a portfolio landlord (with more than 3 properties, which is the new definition of 'portfolio;)

2) for 24 years, I have been a specialist BTL mortgage broker, working with the industry, lenders, clients and I have advised on hundreds of millions of pounds of finance,

My insight is qualified, and please understand that I have never made any public statement for the sake of 'having a laugh'.

As a full time 'property investment sector' professional, my post above is based on evidence.

You may not agree, that is your prerogative, however maybe you just haven't had direct access to the same sources that I have. Not an issue, just that this would obviously result in differing opinions.

Your own bullet points are valid, to a degree, but using your same logic, do you really think that your own armageddon overview really will apply to 40, 50, 60% or more of all property investors?

A lot of it is subjective and a 'what if' scenario, so maybe we will both have to wait and see until the next 4 years are over before we really and truly know the outcome.

Reply to the comment left by "Howard Reuben" at "09/07/2017 - 11:02":

I reckon this will affect the whole market Howard.
Even if the laughable 1 in 5 figure were correct, it would be enough to shift things.
I don't have an Armageddon view of this BTW, as always there will be winners and losers and I am positioning myself accordingly. The only evidence in your post is that you have seen a huge increase in Ltd Company borrowing so it seems others are doing likewise.
Talking of evidence, what percentage of your customers are quite near to or over the £45K tax bracket?

That's between them and their accountant. 😉

I'm with Monty on this one. It's early days and so real indisputable evidence for the impact of s24 is going to be hard to come by. However, the anecdotal evidence that I observe building daily is very convincing. Agents reporting significantly less investor activity, regional and national auction houses having more investment stock available some of which is not selling, friends/professionals and other investors no longer buying, investors (including us) selling selectively, investors (including us) having spent nearly two years on research around the tax issue have not bought in that period - like a lot of the 118 readers and so on. There are then the oblivious many - they will wake up in due course. That's just s24.
Now add in CAB now saying UC is not fit for purpose, letting agent fees ban, deposit level restriction, EPC MEES and the soon to come further fall out from Grenfell. (One HMO landlord in London has just been given 1 week to replace a previously perfectly acceptable alarm system in a blatant knee jerk reaction). You can soon expect more licensing, compulsory NICEIC elec checks, ramped up fire precautions etc.
There is little rationale for the supply of PRS to increase in such a hostile environment. Every reason for it to fall dramatically. Brexit ain't going to happen and so unlimited demand will prevail. Rent controls anyone ?
So yes Monty's 'armaggedon' is pretty much spot on and the evidence will build daily

Reply to the comment left by "Howard Reuben" at "09/07/2017 - 12:34":

Very discrete Howard! I'm guessing that means well over half.

Actually I'm disappointed with the mortgage industry overall on S24 (not you personally), they could have come up with some really solid evidence to debunk the Osborne/Treasury spin and they have considerable political clout but have remained remarkably silent. Some behind closed doors shenanigans perhaps?

Reply to the comment left by "Monty Bodkin" at "09/07/2017 - 13:17":

On that, we are in agreement.

Who knows what goes on behind closed doors?

Reply to the comment left by "Neil Patterson" at "08/07/2017 - 07:18":

Ah ok, so not that good. Ltd co BTL just don't stack up financially, may even cost more than just buying in personal name! Also Ltd co means must "gift" the deposit to the ltd co, and then if ever sold, you'd be taxed when that deposit was taken back out of the ltd co, as profits! double-taxation is bad.

I imagine the govt will legislate harmonise on ltd co BTL soon.

Hi Rich, If you lend money to a ltd company you would take it back out as a directors loan tax free.

I would recommend you take qualified and insured advice from an accountant before you make any financial decisions one way or another so you have the full picture to balance your decisions against.