More than 75% of buy-to-let borrowing will be made by limited companies during the next year, according to one of the leading mortgage companies for buy-to-let.
Foundation Home Loans made this prediction following the release of a study by Broker Mortgages for Business, which indicates that numbers have already increased in comparison to last year. The mortgage broker revealed that 30% of buy-to-let mortgages were to limited companies during the first six months of this year, in comparison to 18% during the same period last year.
Furthermore, the specialist mortgage broker stated that the number of products available to limited companies has also increased. It is believed that the increased availability has led to more investors considering purchasing property through a limited company.
Another reason for the increased number of limited companies purchasing buy-to-let may be the recent tax changes introduced by the Chancellor earlier this year. Tax relief for landlords has been capped at 20%, meaning that higher rate taxpayers lose out, while a limited company landlord pays Corporation Tax at 20%, and higher rate landlords have to pay income tax up to 45%.
Existing landlords will probably miss out on the potential gains as a limited company landlord, as they would have to sell their investment property to the limited company to be able to benefit, which would lead to a Capital Gains charge.
Mortgage advisers have CeMAP training which prepares them for all types of mortgages and their benefits, so they are able to offer advice in most situations.