Surge in buy-to-lets under limited companies

Investment properties in Warley, Essex

More buy-to-let investors opt to go limited

In the months following George Osborne’s decision to increase stamp duty and raise taxes against landlords, many buy-to-let investors are opting to place their property portfolios under the wing of limited companies in order to protect their investments from the chancellor. Experts were quick to point out that investors can still buy properties through limited companies or SVPs (Special Purpose Vehicles), in order to make the most of their investment.

Lenders have seen a marked increase in mortgage applications coming from businesses of late, and the trend looks set to continue as more and more savvy investors head down the limited company route. Also, estate agents in Chelmsford surveyed reported an increase in enquiries about buy-to-let property in the area. Recent figures state that as much as a third of all buy-to-let mortgage enquiries are now coming from companies rather than individuals, a significant jump from last October’s 15 per cent levels.

The increase in limited companies putting forward applications for buy-to-let borrowing has led to lenders re-evaluating their product line, and many are now offering cheaper loans to those who choose to apply for borrowing via a registered company. Lenders are preparing themselves for further enquiries as the news of potential savings becomes more widespread and the increase in the amount of existing and prospective landlords using corporate vehicles continues to rise.

What options are available?

The two main options available to those looking to take shelter from changes to stamp duty are setting up a specific company or a special purchase vehicle (SPV). SPVs are generally the preferred option for those who are just entering into the property market for the first time, whereas transferring property into a company may work better for those who are already existing landlords. Taking full professional advice when making such decisions is prudent as the best option for one investor does not necessarily mean that the same will apply to you.

For many smaller investors, the prospect of going limited can be quite daunting and it is worth remembering that the benefits will only truly be realised if you hold a portfolio of properties rather than just one. Setting up a corporate structure can definitely help reduce your tax implications, but caution should be exercised.

Take advice before making any changes

While the option to avoid the changes implemented by the chancellor in his summer budget is being welcomed by many property investors across the country, it is not without risk. Failing to set up your limited company properly can result in serious consequences further down the line, so landlords are being advised to take specialist advice before they make the leap.

There are many things to consider before switching over to a limited company, not least of which is that the government can change the tax rules again in the future, leaving you potentially out of pocket after incurring the cost of going limited. Seek wise counsel before making the decision, as your portfolio size and the goals that you have from your property investments may not align with the current hype surrounding the limited company craze.

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