It’s funny how things change with the passage of time. Even as a Guildford mortgage broker, we’ve seen many fundamental changes to the mortgage landscape over the last few years. Perhaps one of the biggest has been the shift in the popularity of buy to let mortgages.
Once a relatively straightforward investment vehicle for landlords with mortgaged properties, changes made by government in 2017 saw being a landlord via standard buy to let mortgages become less compelling. Consequently, demand fell.
However, via limited company buy to let mortgages, the desire to build a property portfolio is once again back in vogue.
Unlimited potential
According to research published by Hamptons estate agents, there are now over 300,000 buy to let limited companies in the UK. In fact, a staggering 5,312 limited companies created to hold buy-to-let property in Great Britain were set up last September alone, which is 28% higher than those created in September 2023.
What’s the reason for this growth? Quite simply, it’s the result of the benefits of limited company buy to let mortgages, which have started to outweigh the benefits of buy to let mortgages.
So, let’s take a look at what those are.
The benefits of limited company buy to let mortgages
Under a Cameron-led Conservative government, George Osborne introduced measures that prevented landlords from deducting all of their mortgage interest and associated fees from their rental income. As a result, landlords that required a mortgage to purchase a buy to let property suddenly found it a less profitable exercise.
However, under a limited company buy to let structure, all costs to the business can be deducted before tax.
This means that landlords purchasing properties via a limited company are, in effect, in the same position they were prior to the changes in 2017. Not only that, but as corporation tax is less than income tax, it means the overall amount of money taken as tax is less, too.
Of course, should you decide to pay yourself a dividend from any rental profits you’ve generated, there are tax implications – however this depends on how much you earn. Conversely, if, after amassing a sizeable sum of rental income, you decide to purchase another property with the accrued capital, then there are no personal tax implications; the company is simply buying another asset.
Please note that if you are unsure about any area of your tax situation, you should get further advice from a tax specialist before proceeding.
How do I get a limited company buy to let mortgage?
The good news is that as this type of mortgage has grown in popularity, applying for a limited company buy to let mortgage has become much easier.
And, as buy to let limited companies are required to demonstrate that rental income received on the property is at least 125% of mortgage payments as opposed to the 145% figure stipulated for individual higher tax rate paying applicants, there’s the chance that you could borrow more than you could with standard buy to let mortgages.
There are, of course, pros and cons for limited company buy to let mortgages. However, a mortgage broker will be able to quickly and easily walk you through what these are. As a limited company buy to let mortgage broker in Guildford, we are speaking with people who would like to apply for a limited company buy to let mortgage on a daily basis.
So, if you’re considering building a buy to let portfolio in the most tax efficient way, then we can certainly help.
Looking for limited company buy to let mortgage advice? Contact our team of Guildford mortgage brokers on 01483 238280 or e-mail info@complete-mortgages.co.uk.
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