Tax changes have made an impact

This article is part of
Guide to Portfolio Buy-to-Let

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, agrees: “There has been a lot of speculation landlords will look to sell some of their portfolio.

"Although we are seeing a lot of landlords look to remortgage onto shorter term fixed rates and products with the flexibility to redeem early as they want to keep their options open we have not actually seen a lot of them look to sell. However, if they did it may not be a bad thing as would bring some much needed stock to the market.”

New approaches

There is no doubt that the tax changes, not just for portfolio landlords but landlords and the buy-to-let sector in general, have resulted in many re-thinking their business models.

“We are seeing more enquiries for experienced landlords looking at higher yield properties such as houses of multiple occupation (HMOs) or development opportunities, and also a notable increase in purchases via a limited company,” says Mr Cunnington.

TV presenter and property developer, Kunle Barker, adds that many have decided to set up incorporated companies to own and manage their portfolio.

He warns, however that these changes in business models will likely be “expensive” noting that the transfer of a property into a company will be counted as a sale and so liable for capital gains tax.

“If landlords require lending then it’s important to understand that the mortgage packages available to companies are limited when compared to those available to individuals,” he says.

Mojo Mortgages managing director, Nick Sherratt, suggests that the tax hikes have forced landlords to investigate more aggressive tax planning strategies, such as beneficial interest, and warns that this should be an area of concern for the industry.

He says: “Lenders don’t have an appetite for this process, which could result in re-financing issues for customers in the future and I believe this route will be brought more under the spotlight going forward, with concerns around anti-avoidance legislation high on the agenda.

“Mortgage brokers certainly need to do more to understand the interest terms and tax in general. It is a prominent consideration for any landlord and it is essential that this information is sought from a qualified tax adviser, and mortgage advisers don’t fall into the trap of offering this advice.”

Jennifer Turton is a freelance journalist