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New data from Mortgages for Business has revealed that 63% of applications by landlords purchasing buy to let properties are being made using a limited company structure.
This figure is up from just 21% before the changes to tax relief on mortgage interest were announced by George Osborne in July 2015. This represents a sea change in landlord behaviour and includes both new purchases and “transfers”, i.e. purchases made by landlords selling their personally owned property to their limited company.
In contrast, the number of remortgage applications made via a limited company has remained at a fairly similar level and aren’t expected to rise greatly until those who have recently used a corporate vehicle to purchase property are free from early repayment charges.
In terms of market share, buy to let mortgage products available to limited companies now accounts for 16% of all products, up from 13% in the first half of the year. By number however, availability has remained stable at 195 (average) because the overall number of BTL products on the market dipped slightly.Full/source story UP NEXT - Buying a property in limited company structure vs. in your own name SEE ALSO - Buy to let goes from "strength to strength" DON'T MISS - Advantages and Disadvantages of a Limited Company Purchase NOW WATCH:
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One may presume "Mortgages for Business" name may skew there statistics? from a lead generation point of view.
Though there is certainly a growing trend to Limited Company Buy to Let.
When it comes to a new purchase id say its more of a 50/50 choice depending on personal circumstances.
For Instance:People tend not to remortgage out of personal name to LTD Co - because of Tax Issues.Accidental Landlords / Next time Buyers are stickign to personal name - because of Tax Issues.Portfolio Landlords are certainly looking more towards Ltd Co BTL for new Purchases, though not existing stock.
The reasons why are obvious - the Tenant Tax. Though SDLT and Capital gains is a big concideration for many landlord profiles (i.e. accidental landlords, remortgage2Ltdco Landlords) and then you have the rather personalised Income Tax conciderations that may come into play.
Overall I think LTD Company Buy to Let will be the future. Its rather mixed at the present and requires quality advice.
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Interesting line from the latest CML report for August:Suggestion that a trend is developing in the BTL mortgage market?
Tax relief limited to 18%, corporation tax payable on profit from sale and then further tax if money taken out of company, higher interest rate than individual BTL rates, less choice of lenders. Very easy for government to have different tax treatment for property or investment companies to trading companies.
Why is the company route being viewed so positively?
any taxation can change as we all know
But Companys have always been great supporters of the Torys
It is much harder for a Govt to chage the rules for Companys because of the power they have
We on the other hand are a bunch of Landlords who have grown too big for our boots
and we are not a bussiness after all said and done
Learn Change and Adapt ?????
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Very easy for government to change rules for any particular type of company, e.g. Property and investment companies. Apart from which why is the corporate route considered so attractive, refer back to comments in previous post re tax etc.
You have to remmember Co are so much more accountable
any one can see what a Company owns and makes
Corp Tax is only one part of the story
If a Director wants income be it Salary or Dividend its very tax efficant for the HMRC
Companeys have double taxation in point of fact
I know if I take dividend income my tax rate is over 50%
If I take a salary of more than 8K i pay Tax NI & the Company will also pay employers NI
as a BTL landlord now my Max Tax rate would be 45%
every house i own is also listed at Companys House and I were to sell a Property I would pay a great deal more tax than an individal sole owner
Its the Model the Govt want
because it genarates more tax than sole ownerr BTL
Of course its not for everyone but I think there is a greater risk of S24,B and all tax relife going for individal Landlords
DL, you keep saying on various threads that companies have double tax - that is simply not true.
The rates at which a company is taxed and an individual is taxed are pretty similar (or slightly better for a company) until you get to 100k per year. At 100k per year a company becomes MUCH better. If you take money over 8k by way of dividends rather than salary, then neither you nor the company will pay any NI at all.
let me expline why i think about double taxation
a BTL landlord will pay in genaral two tax rates 20% or 40% in the bussiness is in a personal name
Company Landlords will pay the following if they take dividends
Basic rate Landlords will pay 20% Corp Tax and 7.5% so there tax rate is 27% which is 7% higher
Higher Rate Landlords will pay 20% corp Tax and 32.5% so there tax rate will be 52.5% which is 12.5% Higher
I know the first 5k is Tax free and you dont pay NI but in genaral company landlords will pay more Tax
Dont forget the 5k tax free is not in addition to the tax free personal allowance so if you were a higher rate tax payer to start with it would not work out well
They have you over a Barrel
and your right if you were to take a salary of over 8K a year you will have employee NI and Employer NI
Thats why its double taxation
Also accountancey charges are higher with in a company rather than personal
when added together higher rate tax payers will have a tax rate of around 60%
hope that helps DL
Increasing numbers of landlords are looking to get around the mortgage interest relief changes by incorporating, and its tenants who will bear the brunt of extra stamp duty, Kent Reliance has revealed.
The lender’s Buy to Let Britain report, which looks at the sector up to the first quarter of 2016, found that in the first three months of the year, four in ten applications for BTL mortgages have been via limited companies and they expect more than half to use this route by the end of the year.
A fifth of applications in 2015 were through limited companies, compared with 15% in 2014.
Across the whole market, just under 38,000 limited company loans were issued in the period, nearly four times the 10,100 a year ago, according to the report.Full/source story
With stats like that, expect more Mortgage Companies entering the LTD Co offering.