Seven in ten BTL applications now made through limited companies
Tax changes aimed at cooling the buy-to-let market have driven more and more landlords to set up limited companies, new research from specialist lender Kent Reliance has found.
More than seven in ten buy-to-let applications for house purchase were made via limited companies rather than individuals in the first nine months of this year, up from 45 per cent in 2016, according to its bi-annual Buy to Let Britain report.
It also found that the value of housing in the private rented sector had risen to £1.4tn in 2017, up more than 6 per cent on last year, while growth in the number of households renting had slowed to 2.2 per cent over the year to date, compared with 8 per cent in 2014.
The report suggested the trend for incorporation would accelerate as tax relief on mortgage interest is phased out over the next four years and interest rates rise further from their historic lows.
John Eastgate, sales and marketing director at lender One Savings Bank, which owns Kent Reliance, said the figures marked a shift in the landlord population ‘from being a popular pastime for hundreds of thousands of British amateur landlords, to the preserve of committed long-term investors with experience and expertise.’
He said: “There is a limit to the amount of interference the sector can absorb before we see a severe reduction in supply – an outcome that would see rents shoot up for tenants and reduce their ability to save for a deposit for house purchase.
“The need for a strong and stable private rented sector has not changed, in spite of the government’s announcements in the budget. The removal of stamp duty for 95 per cent of first-time buyers should provide some help for those with savings, but it will also bolster house prices – the same side-effect Help To Buy is having.
“This is not tackling the affordability crisis. Even if the government is able to fulfil its promise to build 300,000 homes a year, it will not be able to do so until the mid-2020s. In the meantime, aspiring buyers will be forced to rely on the very private rented sector that the government has hampered.”
Alex Huntley, Head of Operations at Simple Landlords Insurance added: “Despite the pressures it’s under, the private rental sector has proven to be remarkably buoyant, and landlords are adapting to the changes. Just remember that doing incorporated isn’t always the right answer - and each landlord will need to look at their own personal circumstances before making those changes to how they run their businesses.”