The proportion of landlords letting their property through a limited company rose by 4% in the first three months of the year – the highest ever recorded jump.
According to new data from Countrywide, the proportion of homes let by landlords through a limited company reached a record high of 20% in the first quarter.
Countrywide said that the changes to tax relief on rental properties at the beginning of April was likely to be the cause.
Johnny Morris, research director at Countrywide, said: “The number of rented homes owned through a company is on the up. The incoming tapering of mortgage tax relief is likely driving the increase.
“Companies are generally taxed more favourably, particularly with recent changes by government to tax relief, so in many cases landlords can make cash savings by operating through a company rather than as an individual.”
Mortgage interest relief for residential buy-to-let properties has been reduced to the base income tax rate, which is 20%. Landlords were previously able to claim tax relief on the top rate of tax of up to 45%.
The change means landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
The new rules are being phased in over a four-year period. Landlords will still be able to deduct 75% of costs from rental income in the current tax year. In the 2018/19 tax year it will drop to 50% and then to 25% in 2019/20. After this landlords will only be able to claim a 20% tax credit on mortgage interest.
Rents fell in March, with the cost of a new let was 0.3% lower than in the same month last year, the second consecutive monthly fall.
The average rent of a new let in Great Britain fell to £928, £3 less than the same period last year.
The fall in rental growth was driven by London, the South West and Wales where rents fell by 0.4%, 0.2% and 6% respectively.
“Rents fell again in March, mostly driven by falls in London. Stock growth continues to outpace demand in the capital, giving tenants more negotiating power, pushing down rents. In much of the rest of the UK rents continued to grow, although at a slower rate,” said Morris.
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