Limited company mortgages gain more ground

55% of landlords surveyed will use limited companies for future property purchases, which is more than double the 24% of landlords who intend to buy as an individual.

In the final quarter of 2018 around 44% of landlords planned to use limited companies for purchases and in Q1 of 2019 the number was 53%.

Limited companies are most popular among landlords with a portfolio of 11 or more properties with 71% using them for purchases. It is still the dominant option for those with portfolios of 10 or fewer with 51% saying they will go down the limited company route to buy their next property compared with only 27% buying as individuals.

The phased reduction in mortgage interest tax relief does not affect landlords with a limited company structure and they can offset mortgage interest against profits which are subject to corporation tax of 19% instead of income tax rates. Interest coverage ratios on limited company applications are also lower than for most individual landlord applications.

Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route particularly for those with larger portfolios.

The increased use of limited company status is further evidence of how the buy-to-let market is changing. Landlords of all levels should seek tax advice from a qualified adviser as this could impact future returns.

If you are looking for a new or re-mortgage do get in contact and one of our qualified independent advisers will be happy to help.