Limited company landlords could lose £1,000 a year – research

  • 28/06/2017
  • 0
Limited company landlords could lose £1,000 a year – research
Higher mortgage rates on limited company buy-to-let mortgages will outweigh any tax advantages for investors, according to research from Private Finance.

Following the roll out of the new landlord tax relief system from April this year many landlords opted to invest via a limited company or special purpose vehicle (SPV) which were exempt from the changes. In April figures from Countrywide revealed one in five homes in the UK were now let out through limited companies.

But Private Finance’s analysis claims a limited company borrower can expect to pay 3.41% for a two-year fixed 75% LTV mortgage deal, compared to 1.92% for personal borrowers, cutting their income by £1,000 each year.

Shaun Church (pictured), director of Private Finance, said: “The option to invest through a limited company has come under the spotlight recently as landlords look for ways to offset recent tax changes. But landlords shouldn’t rush into this assuming it’s a safe bet for saving money. Limited company mortgage products are available through a handful of smaller lenders, resulting in higher rates compared to personal borrowing. Investors need to drive down mortgage costs as much as possible to prevent this from eating into their profits.

“Larger landlords might find the tax benefits associated with limited company ownership outweigh the higher cost of mortgage borrowing. Each investor is different and there’s no one-size-fits-all solution. Landlords should ensure they seek professional advice on how best to maximise their profits: an independent mortgage broker can help explain the range of options available to limited company and personal buy-to-let borrowers.”

A spokesperson for Moneyfacts said the figures quoted by the Private Finance covered best buys. The average two-year fixed limited company buy-to-let at 75% LTV for the entire market is 3.94% while the average two-year fixed excluding limited company only options buy-to-let at 75% LTV stands at 3.03%.

Jane Simpson, managing director at buy to let specialist TBMC said she expected competition to increase within the limited company space.

“It is true that the cost of limited company buy-to-let mortgage products is typically higher than for standard individual applicants, although it really does depend on the circumstances,” she added.

“Certainly, limited company products are not the best financial option for everyone and we strongly encourage any buy-to-let clients, especially inexperienced landlords, to seek qualified tax advice before using a corporate structure for their buy-to-let investment.

“That being said, SPVs can work very well for landlords who have several properties in their portfolio, and following the recent changes in the buy-to-let sector and the implementation of the second phase of the PRA regulations at the end of September, we may see further competition in the limited company buy-to-let mortgage space.”

There are 2 Comment(s)

You may also be interested in


Keep up-to-date with all the breaking bridging and short-term lending news and analysis, from regulatory changes to product innovation and inside market knowledge. Take a look at our broker and lender case studies showing short-term finance in practice.


Find all the news, opinion and analysis for property finance brokers specialising in commercial and semi-commercial mortgages, alternative and development finance for commercial investments in residential projects.

Second charge

Stay up-to-date with the latest news, analysis and opinion on the secured loan market as it evolves into a mainstream finance option following European regulation on 21 March 2016.

Complex buy-to-let

Whether it’s a complicated asset or a complex customer, you’ll find out all the breaking buy-to-let news in this section. From limited companies to portfolio landlords, student lets to a House in Multiple Occupation, we’ve got all bases covered with our up-to-the-minute news, analysis and opinion.

Mortgage Solutions

Find all the breaking news, analysis and industry comment on Specialist Lending Solutions' sister site, Mortgage Solutions

Read previous post:
variety of ties on shelf
Marketwatch: Is a mortgage lender at a disadvantage if it launches direct first?

HSBC is the best-known lender to turn to the intermediary market when its bid for market share and growth began...