Landlords Invest as Limited Companies

It is becoming more and more common for landlords to invest in properties through a limited company, according to Mortgages for Business’ Limited Company Buy to Let Index.

The proportion of purchase applications made through a limited company structure has seen a significant quarterly growth of 6 per cent, reaching 69 per cent in Q4 in comparison to 63 per cent in Q3.

This sudden growth is directly influenced by the changes to tax relief on mortgage interest, which were revealed in July 2015. Since that date, the number of purchase applications through limited companies has grown rapidly, up from a mere 21 per cent.

This increase in usage encompasses both new purchases and ‘transfers made by landlords selling their properties to their own limited company.

Managing director at Mortgages for Business, David Whittaker, said: ‘The sharp increase in purchase applications made by landlords using a limited company structure is unsurprising given the financial incentive to do so. With the changes to tax relief set to be phased in from April 2017, this trend is unlikely to be reversed any time soon.’

However, in spite of the evolving limited company trend, there has been little change in the number of products and lenders catering to these structures, remaining at 14.

Whittaker added: ‘Many mainstream lenders do not yet have an offering for investors using limited companies whilst many smaller lenders have significant expertise when it comes to servicing this part of the market.’