78% of BTL purchases now for Limited companies

78% of BTL purchases now for Limited companies

11:40 AM, 5th July 2017, About 8 years ago 21

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Mortgages for Business have reported that 78% of all Buy to Let applications are now in the name of limited companies post Section 24 mortgage interest relief reductions coming into force.

73% of all completions including remortgages this quarter were for limited companies up from 62% in the first quarter of this year. Click here to see full Mortgages for Business report.

This shows the massive switch from purchasing in landlords personal names as under section 24 the profit individuals are taxed on does not take into account mortgage interest meaning you can be taxed on a non-existent profit or pushed into a higher tax band with only a 20% basic rate of tax being allowed to be claimed.

However, for a limited company all mortgage interest is deducted from gross profit and taxed only on net.

Steve Olejnik, of Mortgages for Business said, “Landlords are increasingly looking to limited company structures because of the benefits they bring in the form of tax efficiencies and softer affordability testing. The structures are not without their hurdles, however, and we recommend all our clients take professional tax advice before deciding how to proceed.”

“The report also shows pricing improvements, particularly three and five-year fixed rates, as buy to let lenders seek to compete in the ever-increasing limited company space. Among buy to let products available to limited companies, the average three and five-year fixed rates fell by 0.4% each to 3.7% and 4.0% respectively. This further narrows the gap with the wider market, with the average three-year fixed rate across all buy to let products just 0.2% lower at 3.5%.”

Today I launch my comprehensive report on Section 24 of the Finance (No. 2) Act 2015

Today I launch my comprehensive report on Section 24 of the Finance (No. 2) Act 2015

24/10/2016

Today I launch my comprehensive report: Section 24 of the Finance (No. 2) Act 2015: “the unjust legislation that will make the UK housing crisis much worse.” I would like to thank all of those who have contributed to this report, which I hope will have a significant impact in our campaign to reverse this… Read more

 


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AnthonyJames

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16:58 PM, 10th July 2017, About 8 years ago

Reply to the comment left by "Rich Green" at "10/07/2017 - 07:35":

Hi Rich - Neil is quite correct. You do not "gift" the deposit to the company - you as director make a loan, which can be repaid tax-free as the company hopefully makes profits on its BTL investment. You can even charge the company interest on the Director's Loan, which can give a small tax advantage if you do not use up your annual interest allowance.

I agree there is some risk that the Government will seek to change company taxation, if it sees lots of private landlords incorporating, even though this will bring the Government into conflict with large companies that are investing in the build-to-rent market. One useful defence against a tax raid on so-called investment companies (ones that just hold property to rent) would be to ensure your company does some related trading activities as well: getting involved in renovations or new-build development, for example, or acting as a letting or managing agent for other people's properties.

Actual property development may be a step too far for many landlords, but they might be interested in investing their retained corporate profits and capital in someone else's development activities instead, perhaps in Special Purpose Vehicles, one development at a time, to demonstrate to HMRC that they are "trading" as well as "investing".

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