A report from one of our lenders found an increasing number of landlords are securing buy to let (BTL) financing through a limited company. This is not surprising to us as the upcoming changes to tax are viewed as penalising landlords and make entering the rental market as a private investor less attractive.
Interest rates are just as competitive as they would be if they were buying in a personal name – for example, we know of a lender who is offering a BTL tracker mortgage for a 80% loan to value, at 3.79% for two years. For landlords who are looking for a lower loan to value, there is a lender offering a 2.94% discounted variable. Both products wouldn’t usually be available on the high street.
Furthermore, it’s tax efficient; if the landlord leaves some of the rental income in the company, rather than draw it out, they will not then be subject to income tax. As a limited company, the landlord will not be liable for Capital Gains Tax should the property increase in value. As a limited company, the mortgage payment can be offset against the rental income, another benefit to buying a BTL property as a company, rather than an individual. Finally, the company will only be subject to corporation tax on its profits and gains which is currently at 20% but is changing to 17% as of 2020. This will be lower than the basic rate of income tax.
This week, The Daily Telegraph published a roundup of the best buy to let mortgages on the market, featuring comments from our Associate Director, Chris Lloyd: “”This time last year, you wouldn’t have seen any rates below 4.5% for these types of loan – it’s dropped so much. Buy to let has been transformed this year.
“Last year we couldn’t really offer anything competitive but now the rates actually make sense.
“However, the cheapest loans often have the most stringent affordability criteria, meaning that for most clients, the gap is significantly narrower.