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Limited company landlords: Is your customer making the most of the Stamp Duty holiday?

Adrian


Colin Barrett - Group Mortgage Proposition Director

Published 30.07.2020

I think it’s fair to say that the Stamp Duty holiday on the first £500,000 of property purchases is a welcome boost for the housing market.

The holiday, which will remain in place until 31st March 2021, could have positive implications for homebuyers across the country. Amongst those who could benefit are limited company landlords.

There’s been an increasing number of landlords running their buy to let business as a limited company in recent years as investors explore alternative ways of boosting their rental yields following a series of regulatory changes. According to the latest research by BVA BDRC1, buying a property within a limited company structure remains the most preferred purchase route, with 45% of landlords saying they intend to buy their next buy to let property as a limited company. That figure rises to 59% for those landlords with 11 or more properties.

The holiday presents a big opportunity for landlords looking to expand their portfolios. Say, for example, you’ve got a limited company buy to let customer who’s looking to buy a new investment property for £232,000 (the average UK house price)2. They’ll still have to pay the 3% surcharge that’s payable on second property purchases, but instead of paying £9,100 in Stamp Duty they’ll now only pay £6,960. That’s a saving of £2,140 – a not inconsiderable sum, especially if they’re looking to buy more one than property.

Customers who’re thinking of running their buy to let business in a limited company structure could also benefit from the holiday. As incorporating involves ‘selling’ their properties to the business and would normally incur a Stamp Duty charge, they’ll pay considerably less tax until the end of next March. So if you have a customer with a large portfolio of properties who’s considering incorporating their buy to let operation, the tax holiday could save them tens of thousands of pounds.

I should mention at this point that running a buy to let business in a limited company structure may not be suitable for everyone. Customers should always speak with a suitably qualified tax advisor and take legal advice before making any decisions.

To help investors make the most of this opportunity, we’ve launched our Summer Sizzler limited edition 5 year fixed rate mortgage that’s designed specifically for single dwelling limited company landlords. The product features:

  • 5 year fixed rate only 3.54%
  • Up to 75% LTV
  • Available for purchases and remortgages
  • Newly formed SPVs accepted
  • No limit on the number of director dependant shareholders under the age of 21

We’ll assess affordability on the pay rate and customers can have up to 20 buy to let mortgages up to a combined value of £10 million with us (unlimited with other lenders). The offer’s all backed up by a quick decision making process and fast turnaround times.

To find out more about how we could help your limited company landlords, contact a member of our Sales Team or call our dedicated support team on 0800 116 4385.

Source: 1 BVA BDRC Landlords Panel Report Q2 2020 (slide 56)
2 https://www.gov.uk/government/news/uk-house-price-index-for-march-2020

 

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