Buy-to-let investors could ‘outfox’ the Treasury by getting a mortgage as a limited company rather than as an individual, according to David Whittaker.
The managing director of Mortgages for Business said there were 122 mortgage products available for limited companies.
Mr Whittaker said: “The mortgage market was well prepared for the chancellor’s grab on landlords’ tax relief. Mortgages that allow limited companies to be borrowers comprise 13 per cent of all products on the buy-to-let market.
“It means that a good number of landlords and investors will have the opportunity to outfox the Summer Budget by taking advantage of the tax benefits associated with registering as a limited company.
“However, limited company mortgage products may not be for everyone. Registering as a limited company takes time, money and can be complicated. The average interest rate for limited company mortgages is also greater than the average rates available in the wider market.”
The overall average cost of a mortgage product for a limited company stood at 5.4 per cent a year at the start of July, while the average annual rate for the entire BTL mortgage market was just 4.6 per cent.
It follows the announcement in the Summer Budget that the relief on finance costs that landlords of residential property can get currently will be restricted to the basic rate of income tax.
This will be phased in over four years, starting from April 2017.
Adviser view
Adrian Anderson, director of London-based Anderson Harris, said: “It is only fair that there is a more level playing field between first-time buyers and landlords, but if the government’s tax break had been completely withdrawn, not just restricted to the basic rate of income tax, buy-to-let would have been far less attractive to investors.”
