More landlords are turning to limited companies in a bid to avoid buy-to-let tax changes being introduced this month.
Mortgages for Business reports that 77% of buy-to-let applications involved limited companies in the final quarter of 2016. This compares with 21% before the Spring Budget in 2015, when the changes to mortgage interest tax relief were first announced.
From 6th April 2017, landlords will not be able to deduct mortgage interest in full when they work out their profits. This measure applies to residential buy-to-let properties only, so properties transferred into limited companies will not be affected by the tax change.
Landlords who have properties in a limited company will instead have to pay Corporation Tax, which is set to drop from 20% to 18% from 2020.
As well as the option of owning their property as a limited company, landlords are also exploring other options available to them in the wake of tax changes, including HMOS and transferring their property over to a spouse in a lower tax bracket.
However, there is concern that increased tax costs for landlords could lead to even higher rents for tenants, at a time when many tenants in London are already struggling with high rents.
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