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Why more landlords are making the move to limited companies


Ryan - Underwriting Team

Published 14.02.2019

The chances are you’ll have recently been approached by a customer thinking of setting up a limited company to run their buy to let business.

According to research recently carried out by BVA BDRC, 44%1 of all landlords say they intend to purchase their next buy to let property within a limited company structure – a figure that increases to 64% for landlords with 20 or more properties – and it’s now the most preferred purchase route for landlords looking to buy a new property.

So why are so many landlords considering running their buy to let business as a limited company?

  • The phased reduction of mortgage interest tax relief does not affect limited company landlords. It means limited company landlords can offset all of their mortgage interest against profits from their rental income.
  • Profits are subject to Corporation Tax which currently stands at 19% and is due to reduce to 17% by 2020/2021 tax year. This is lower than the 20% basic rate of tax, the 40% higher rate and the 45% additional rate.
  • Limited company applications are stress tested at an ICR of 125% - less than the 145% ICR most lenders apply to individual landlord applications.

Precise Mortgages recently helped a customer who wanted to transfer his buy to let properties into a limited company structure. Not only were we able to offer them six new 5 year Fixed rate mortgages on LTVs of up to 75%, we were also able to capital raise on the properties, enabling them to pay for light refurbishments to increase the value of the properties and achieve a higher rental yield.

Our team is on-hand to support you with specialist solutions so you can help your limited company customer get the mortgage they want. Our limited company products, systems and processes have helped thousands of customers, including HMO and portfolio landlords.

It’s worth noting, however, that landlords thinking of transferring across properties from individual ownership to a corporate structure should be aware that it could incur considerable costs. As the properties must be legally sold, the move will be seen as a sale and purchase and could incur Stamp Duty, Capital Gains Tax and Early Repayment Charges. Customers should always speak with a suitably qualified tax advisor and take legal advice before making any decisions.

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

Source: 1 BVA BDRC Landlords Panel Q4 2018


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