Large increase in buy-to-let landlords using limited companies

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In the third quarter of 2017, around 80% of new buy-to-let commercial mortgages were from limited companies, reported in October 2017.

Many mortgage applications are from newly formed limited companies. Over 40% of mortgages have been from newly formed limited companies.

Following the cuts to tax relief on buy-to-let mortgages, many landlords have created limited companies to own properties because limited companies are not affected by these tax changes. There was a spike in newly formed limited companies after the chancellor announced the buy to let tax changes.

Companies House has confirmed that there has been a large increase in Special Purpose Vehicle (SPV) Limited company registrations that many landlords use. There have been 20,000 SPV registrations by the end of the third quarter of 2017. It is predicted that there could be as many as 35,000 by the end of 2017. In the whole of 2014, there were 13,000 SPV registrations, which shows the scale of the increase.

Not all mortgages by limited companies are for new buy-to-let property purchases, many companies are remortgaging property to raise funds.

Although limited companies can have tax advantages compared to individual landlords owning buy-to-let properties, there are other costs associated with setting up and administering limited companies. There are also many regulations to comply with. Before forming a limited company, landlords should seek financial advice from an advisor with particular knowledge of limited companies, including their advantages and disadvantages.

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