Buy-to-let investors could benefit from setting up a limited company
Friday 9 March, 2018
Thomas Oliver’s Hertfordshire Mortgage Broker, Vishal Gulrajani, considers why anyone with a buy-to-let portfolio may benefit from the new limited company products and mortgages that are available.
For anyone looking to invest in a property as a buy-to-let transaction or has investment properties, the last couple of years have been difficult. This is due to the new tax relief changes on rental property income.
The basic premise of the tax relief changes that will take full effect in 2020 is that higher rate tax payers can only claim back expenses at the rate of a lower rate tax payer. As a result this means you pay more tax on your property rentals and your profit is reduced which could cause serious detriment to your finances. This is compounded by other issues, for example you now are unable to claim your interest only mortgage as an expense, and you cannot reclaim the 10% wear and tear as an expense on each rental property you own.
Vishal Gulrajani, Mortgage Broker in Goff’s Oak & Cheshunt, Hertfordshire said:
‘We have been aware of these changes for quite a while now and the reduction of calls for the reversal of these changes has significantly reduced, showing that people are resigned to the fact these changes will continue to be implemented. As a consequence we have seen a lot of investors purchase or re-finance their personal investment properties through a special purpose limited company to help alleviate the financial implications of the new tax changes. However, there are currently very few lenders willing to offer limited company buy-to-let purchases and therefore the interest rates are relatively high and the process is very drawn out. However the good news is that The Mortgage Works (TMW) the biggest buy-to-let lender in the UK has trialled their own limited company products and mortgages for the first time in six years. Consequently we could see more lenders and more providers opening up limited company buy-to-lets over the next year. This means we may see more competitive rates and more options which should lead to a smoother process that will benefit consumers in the long-term.’
Vishal Gulrajani, Mortgage Broker and protection specialist in Goff’s Oak & Cheshunt, Hertfordshire continued: ‘Overall the buy-to-let market has taken a short-term fall but with lenders like TMW coming back into the limited company buy-to-let market I am hopeful we should see an increase in the number of products available by the end of the year. Buying properties is still one of the best forms of long-term investing available in the UK. I would strongly recommend anyone looking to purchase property as an investment speaks to a tax advisor to get clarification on the tax changes and how it might impact you. Also contact us for buy-to-let re-mortgage advice on 01707 872000. We can discuss how the mortgage market has adapted and review the mortgage products available which would best suit your financial circumstances.’
For more information please read: Vishal Gulrajani, Mortgage Broker and protection specialist in Goff’s Oak & Cheshunt, Hertfordshire: