Mortgages  

How to side-step cull of buy-to-let tax relief

    CPD
    Approx.30min
    How to side-step cull of buy-to-let tax relief

    When talking about the ‘niche within a niche’ that is the use of limited company vehicles within the buy-to-let sector, it is still very much the case that we are talking about a relatively small, but growing, amount of business.

    Even before the chancellor’s Summer Budget in July last year, the use of limited companies or special purpose vehicles (SPVs) was undoubtedly increasing, particularly among professional portfolio landlords who had already identified some of the advantages of purchasing and holding property within such a structure.

    This was certainly something we had identified back when we established Fleet Mortgages in September 2014 and it was always our intention, far before the Summer Budget, to play a full role in the provision of products to those wishing to buy or remortgage through a limited company.

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    Which of course is not to say that this sub-sector was over-subscribed in terms of product availability, or that since our entry, the competition within it has increased exponentially.

    It wasn’t and it hasn’t.

    This is a part of the market which is still relatively small although there is positive movement and much greater product choice today than just six to 12 months ago.

    The latest figures from Mortgages for Business prove this.

    At the tail end of 2014, the number of limited company buy-to-let products was 79; by the end of the first half of 2015 this had improved to 99.

    I would suggest now that limited company products have moved past the 100 mark and are pushing upwards, but as stated above, this is still a niche area and is likely to remain so, albeit with more lenders looking at the market.

    Lender involvement has certainly grown in the past 12 months – again the Mortgages for Business research reveals that, at the end of June, 23 per cent of all buy-to-let lenders offered such products, up from 21 per cent at the end of 2014.

    This means that 12 per cent of all buy-to-let products are now for borrowers using limited companies with (on average) the pricing on those products 0.8 per cent more expensive than those available for, what we might call, standard individual buy-to-let borrowers.

    Now, while pricing is clearly an important point to note when it comes to choosing which mortgage products to access, when it comes to the use of a limited company or otherwise, there are many more considerations to review.

    This has clearly been brought into sharper light by George Osborne’s decision to do, what he called, ‘level the playing field’ when it come to buy-to-let borrowers and homeowners.

    As you will see, I’m not sure there is actually any ‘leveling of the playing field’ either necessary or required, however unless there is a sizeable U-turn, there are going to be some notable decisions for advisers and their clients to make in terms of buy-to-let investment over the next few years.