There is yet more evidence that an increasing number of buy to let investors are setting up companies to offset the worst impact of changes to mortgage interest tax relief.
The latest Mortgages for Business ‘Limited Company Buy to Let Index’ reveals there was a surge in the proportion of applications for buy to let properties made by landlords using limited companies at the end of 2016.
The Index shows that the proportion of purchase applications made through a limited company structure jumped by six percentage points from 63 per cent in the third quarter of 2016 to 69 per cent in Q4.
This is substantially higher than the 21 per cent recorded before the changes to tax relief on mortgage interest were unveiled by former Chancellor George Osborne in July 2015.
Mortgages for Business says that over the past 18 months, landlords’ behaviour has changed substantially as the sector comes to terms with the new tax regime. The increased use of Limited Company structures includes both new purchases and transfers - that is, purchases made by landlords selling their personally owned property to their limited company.
The proportion of remortgage applications made via Limited Company structures also increased from 23 per cent in Q3 to 31 per cent in Q4.
“This is a sign that greater numbers of investors are choosing to transfer their properties into limited company names, effectively reducing the proportion of remortgaging applications made by individuals” says the broker.
“The sharp increase in purchase applications made by landlords using a limited company structure is unsurprising given the financial incentive to do so, and it is encouraging to see growing numbers of landlords approaching their investments intelligently. With the changes to tax relief set to be phased in from April 2017, this trend is unlikely to be reversed any time soon” says David Whittaker, managing director of Mortgages for Business.