Other ways to lets landlords obtain the lending required under the new buy-to-let lending curbs

Other ways to lets landlords obtain the lending required under the new buy-to-let lending curbs: Six in ten invest through limited companies to avoid the new rules.

More and more landlords exploiting loophole in buy-to-let crackdown They are investing in properties through limited companies to avoid rules Curbs previously announced threatened them with bigger tax billd

Soaring numbers of landlords are using a tax loophole to beat the government’s buy-to-let crackdown.
More than six in ten are now investing in properties through limited companies to avoid rules coming in next year.
Curbs on buy-to-let, announced by former chancellor George Osborne in 2015, threaten to land thousands of landlords with bigger tax bills.
But the new rules will not apply to landlords who invest through a company rather than as an individual.

Buy-to-let landlords are avoiding a government crackdown by investing in properties through limited companies to avoid bigger tax bills (file picture)
Figures show the number of applications for a buy-to-let mortgages made by businesses have tripled in the past year.

Now, 63 pc of applications for landlord loans are being put through a business, up from just 21 pc before Mr Osborne announced his crackdown in July 2015, according to specialist broker Mortgages for Business.

The figures include both investors making new house purchases and landlords setting up companies and then selling their existing properties into them.
Steve Olejnik, chief operating officer for Mortgages for Business, said: ‘Going forward, we expect the number of landlords using limited companies to rise because it will be more tax efficient for the majority to buy property this way.
‘Following new guidelines, landlords borrowing in their own names may find that they are unable to borrow as much and will certainly be subject to stricter affordability checks.’

Currently landlords can claim tax relief on mortgage payments at the rate they pay income tax – up to 45 per cent.

But over the next four years this will be gradually reduced to 20 per cent, making buy-to-let unprofitable for many landlords.
Some will even begin to see losses.
On top of this buy-to-let investors now have to pay an extra 3 per cent in stamp duty when they buy a property.
And from January next year banks and building societies must introduce tougher affordability checks to ensure borrowers could endure a sudden interest rate hike.
Many landlords could be refused a loan as a result, Mr Olejnik said.
By contrast, investors who hold properties in a limited companies will continue to benefit from the full tax relief.
This is because they can write off all costs of running their buy-to-let properties as an ‘allowable expense’ – including mortgage payments.
They then face just 20 per cent corporation tax on the profits, instead of income tax of up to 45 per cent paid by individuals.
Limited company owners could also benefit from more relaxed affordability checks as lenders will take into account the fact they will still benefit from tax relief.

Properties bought through companies will incur stamp duty at the increased rate.
The number of mortgages on offer to limited companies has also risen to 195, the figures showed.
Meanwhile, the average interest rate is lower at 4.3 per cent – or one percentage point higher than the average rate paid by the typical landlord who invests as an individual.
David Hollingworth, of mortgage broker London & Country, said: ‘We could well see more lenders start to offer buy-to-let loans to limited companies as more investors choose to go down this route.
‘However, setting up a limited company is far more complicated than owning a property in your own name and there are costs involved.
‘Investors will also need to file annual returns and accounts.
Anyone considering this option must get professional advice to make sure all the maths works out.’

Source: http://www.dailymail.co.uk/news/article-3826214/Loophole-lets-landlords-dodge-buy-let-curbs-Six-ten-invest-limited-companies-avoid-new-rules.html#ixzz4MO1j99sQ

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