Depending on what day you choose to read the news, you’ll either read that buy-to-let mortgages are on their way down, or the best thing since sliced bread.
It’s true that interest from those looking to apply for a buy to let mortgage has been somewhat erratic over recent years. However, one thing that isn’t in question is the rise in the number of people looking to apply for a limited company buy-to-let mortgage.
As a Guildford mortgage broker that’s seen first-hand the level of interest in this type of mortgage grow over recent years, we initially wondered if this was area-specific. Could it be a Surrey mortgage broker phenomenon? Or was it just luck on our part? It turns out it was none of the above.
Research carried out by Paragon Bank has revealed that the proportion of landlords planning to purchase their next property via a limited company has hit a three year high. The research, which sampled 700 landlords, unveiled that the number rose from 50% to 62% in Q2 of this year.
So, what’s the driver? More importantly, what are the benefits of buying a property through a limited company? Here are our top three.
1. Taper the tax *
If you buy a limited company buy to let property, you’ll pay less tax. Rather than pay tax at a personal rate, which could be as much as 45%, you’ll pay the corporation tax rate, which, until April 2023, is 19%.
2. Inter-company investment *
If you’re already a director of another company that has built up a healthy cash reserve, then transferring money from it to your buy-to-let company is easy to do via an inter-company loan – and it doesn’t incur any tax liabilities. So, if you’ve been looking for ways to make your other business’s money work harder (and if it’s sat in a business account then it’s likely to be getting 0% interest), then this could be an ideal way.
3. Enjoy your expenses *
One of the reasons that standard buy to let mortgages became less attractive was that mortgage expenses stopped being deductible from rental income before paying tax, which made buy to let ownership more expensive. With limited company buy to let mortgages, the mortgage is a cost to the business and therefore 100% allowable.
Back to the headline, then. Are there unlimited opportunities with limited company buy to let mortgages? No, but as a vehicle in which to build a buy to let property portfolio in a tax efficient way, limited company buy to let mortgages are hard to beat.
There are, of course, a number of drawbacks to buying property through a limited company, but we can talk you through the pros and cons of limited company buy to let mortgages during an initial consultation.
For limited company buy to let advice or to speak with a buy to let mortgage broker in Guilford, contact the Complete Mortgages team on 01483 238280 or e-mail info@complete-mortgages.co.uk.
* please note that Complete Mortgages is unable to offer advice on an individual’s personal taxation situation and the impact this will have on their buy to let property portfolio and income. Always seek further advice from a tax specialist before proceeding.
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