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Leading buy to let lender, Kent Reliance, has seen mortgage applications from landlord limited companies triple in September, compared to the same period last year. This is as a result of landlords scrambling to beat biting tax cuts unveiled by the Chancellor in his Summer Budget.
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Mortgage Interest Tax Relief to be Phased Out
Mortgage interest tax relief is to be phased out completely by 2020, which will affect larger landlords with several properties. The Chancellor has also increased stamp duty land tax for anyone owning a second property which, the National Landlords Association suggests, is a move to completely obliterate the private rental sector in the UK.
Savvy landlords can’t even buy their properties through off-shore companies any more. The Chancellor has imposed a stringent annual charge on properties held this way, which has been designed to prevent non-domiciled property owners using off-shore structures to avoid big inheritance tax bills.
Landlords Move Portfolios into Limited Companies
The government is planning on exempting landlords with more than fifteen properties in their portfolios, so experts believe that many more will go down the incorporation route next year. Even smaller landlords can beat the tax changes by forming joint companies with other smaller landlords. However, such a move is not one to take lightly as there are many other factors to consider, not least capital gains tax.
Despite the changes, some feel that it is not a bad thing if inexperienced landlords are ‘put off’ investing in buy to let properties.
