Martin & Co - one of Britain’s largest letting agency networks with 192 offices across the country - says it may urge its landlord clients to set up limited companies to minimise their tax liability.
The government is proposing to cut mortgage interest tax relief to the basic level of income tax between April 2017 and April 2020 - even for landlords who pay higher rates of tax. In some cases landlords set up as limited companies may avoid the restriction.
Martin & Co chief executive Ian Wilson says he is awaiting the outcome of a possible court challenge to the measure, being mounted by two private landlords with a legal team led by Cherie Blair QC.
If the challenge fails he says Martin & Co will probably “jump on the bandwagon” and encourage landlord clients to incorporate. The agency will not involve itself directly but will recommend expert tax advisers.
However, he concedes that many landlords will in fact be unaffected by the proposal because a high proportion of them are either mortgage-free or owe relatively little on their buy to let properties.
In a presentation to journalists this week, Wilson cited research from DataLoft which suggests that if rents rise by an average of five per cent per year, the tax relief changes will be rapidly negated for higher rate tax payers.
Wilson says the buy to let measures introduced by the government - including next month’s three per cent stamp duty surcharge on additional properties as well as reform of the Wear & Tear allowance - have combined to “create uncertainty” due to their “corrosive” nature.
The measures, collectively described by Chancellor George Osborne as being designed to give greater priority to making stock available for first time buyers, are not having the desired effect, according to Wilson.