Specialist Lending - May 2017  

Top Tips for complex buy-to-let

  • To understand the tax changes to buy-to-let.
  • To ascertain what potential obstacles advisers must overcome when discussing complex buy-to-let.
  • To learn how to help clients with complex buy-to-let portfolios.
Top Tips for complex buy-to-let

Property ownership is many people's dream, but for some it's also their biggest investment.

Buy-to-let has often been cited by some people as their 'retirement plan'; people may have only saved a small pension but have several homes outside of their primary residence, from which they aim to get a rental income or garner a significant lump sum for later life expenditure.

The Council of Mortgage Lenders' (CML's) 72-page Profile of UK Private Landlords, surveyed 2,517 landlords in the UK, compared with 1,340 in 2004.

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Altogether, these own a total of 5,627 rented dwellings, 47 per cent of which are backed by a buy-to-let mortgage and 16 per cent by some other type of loan, such as commercial mortgages or consent to let. 

Given the importance of buy-to-let in the minds of many clients, it is clear good advice is needed to help strategic property investors and 'accidental landlords' - the CML data suggested 62 per cent of all landlords had just one property, perhaps the result of an inheritance - make the most of the investment.

Traditionally, there has been a clear distinction between a 'simple' or 'vanilla' residential buy-to-let transaction and a more 'complex' one, such as where the property in question relates to a houses in multiple occupation (HMO) tenancy, multi-unit freehold blocks (MUFB) or semi-commercial property (SCP).

Growing complexity

But it's not that straightforward any more: even traditional, plain vanilla buy-to-let is becoming more complicated, not least thanks to legislative and tax changes brought in over the past few years. 

Cases which may once have seemed straightforward may now need more detailed tax advice; more complicated underwriting may be required and clients will need much more hand-holding when it comes to investing in bricks and mortar. 

As David Hollingworth, associate director of communications for London and Colonial, comments: "Defining complex buy-to-let is a difficult thing to do and many cases will have something that may not quite fit with a 'vanilla' lender or product.

"What makes a case more complex could be due to a variety of different elements, ranging from the type of property, such as an HMO to the method of ownership, such as a limited company buy-to-let."

As a result of growing complexity, as well as various legislative and tax changes, it appears to be getting harder when it comes to complex-buy-to-let advice.

Changes to the market

Tax changes in recent Budgets have certainly complicated buy-to-let advice. Most of the changes were brought in during 2016, creating a more stringent tax environment in what former chancellor George Osborne claimed was a move to make the property market fairer for first-time buyers. 

New tax rules were: