There has been a surge in the number of landlords switching from buy to let (BTL) mortgages, and moving to limited company mortgages. This is Money reports that over 50,000 limited companies have been registered for this purpose over the past year, because it represents better value for money.
Since 2017, landlords’ profits have taken a hit from a change in tax rules, which means that they now have to add their rental income to their other income when completing their tax return. Previously they were allowed to deduct all the mortgage interest from the rental income and just pay tax on the difference.
By forming a limited company, landlords are allowed to separate their rental income from other income, thus avoiding the higher tax rates. However, in some cases, mortgage rate may be higher for a limited company, so it advisable to seek the advice of a specialist broker before taking action.
Aneisha Beveridge, head of research at Hamptons, told the publication: ‘The number of new incorporations is likely to remain relatively high over the next 12 months on the back of the stamp duty cut, which saves the average investor just under £2,000 when moving a buy-to-let from personal to company names.”
She added: ‘But the big driver is the financial advantage of being able to offset mortgage payments as interest rates rise. This means that limited company investors stand a better chance of turning a profit in a world where mortgaged landlords are coming under increasing pressure.’
Some landlords have had no choice but to increase rents as they face higher mortgage costs themselves, but this is often not enough to offset the mortgage hikes which some borrowers will be braced for when their current term ends.
If you would like some more buy to let mortgage advice, please get in touch with is today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
Back to Blog
Create Finance Limited is an appointed representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
Create Finance Limited. Registered Office: 35 Friar Gate Studios, Ford Street, Derby, Derbyshire, England, DE1 1EE. Registered in England Number: 09582938.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
We may receive commission that will vary depending on the lender, product or permissible factors, The nature of any commission model will be confirmed to you before you proceed. Create Finance Ltd are a credit broker, not a lender.