Landlords move quickly to avoid tax hikes
Changes to the tax treatment of landlords have already triggered a surge in landlords borrowing through companies, and this will be boosted by tax changes announced in the Autumn Statement, according to a buy-to-let report published by Kent Reliance.
It said that changes announced in the Budget, lowering the tax relief for mortgage interest payments for landlords from April 2017, have already caused an increase in the number of landlords seeking to incorporate – in other words form a limited company through which to buy and hold properties.
Kent Reliance saw applications from limited companies surge immediately after the July Budget. This has accelerated as landlords absorbed the impact of the tax changes; in September, applications tripled year on year (+213%). One quarter of all buy-to-let mortgage finance demand is now through limited companies, up from 13% a year ago.
More to come
Following the Autumn Statement, the Treasury is consulting on whether corporate entities with over 15 properties would be excluded from the newly announced Stamp Duty surcharge, an exemption that will add further incentives for professional landlords to incorporate, boosting demand.
Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands, said: “The Chancellor has trained his sights on buy to let, given the sector’s rapid rise in value, but the changes to the tax treatment in the last six months will bring unintended consequences.
“First, the rush to put properties inside a limited company will be sustained, especially if larger scale investors are indeed exempted from the new Stamp Duty surcharge. Secondly, the buy-to-let market will see activity hit overdrive between now and April as landlords seek to beat the Stamp Duty deadline.”