Changes to taxes on buy-to-let have triggered a lending surge in landlords borrowing through companies, and further changes will follow the Autumn Statement, a new report suggests.
According to Kent Reliance, lowering the tax relief for mortgage interest payments in the Budget has already caused an increase in the number of landlords seeking to incorporate.
The firm said this has accelerated as landlords absorbed the impact of the tax changes with applications tripling for the year to September by 213%.
One quarter of all buy to let mortgage finance demand is now through limited companies, up from 13% a year ago.
For the whole buy-to-let market this means 56,800 buy-to-let loans will be issued to companies in 2016, an increase of over a fifth compared to the estimated total for 2015 of 46,700.
Kent Reliance pointed out that following the Autumn Statement, the Treasury is consulting on whether corporate entities with over 15 properties would be excluded from the stamp duty surcharge, an exemption that will add further incentives for professional landlords to incorporate, boosting demand.
The 3% stamp duty charge announced in the Autumn Statement would represent an additional upfront charge of £6,622, which landlords could seek to recoup through rental charges.
Andy Golding, chief executive of OneSavings Bank, said: “First, the rush to put properties inside a limited company will be sustained, especially if larger scale investors are indeed exempted from the new stamp duty surcharge. Secondly, the buy to let market will see activity hit overdrive between now and April as landlords seek to beat the stamp duty deadline.
“Yes, smaller-scale investors are now more likely to think twice before investing and I see that as a good thing. However, in the longer term, it is tenants who will pay the price of the chancellor’s tax raid on buy to let, as landlords will recoup increased costs through rent increases. Ultimately, the move will do little to help tenants save for a deposit on a home of their own. Making rented homes more expensive was surely not the Chancellor’s intention.”
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