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BUY TO LET - the challenges for smaller landlords

Journalist: Emma Simon, Mortgage Strategy

ended 25. September 2023

I'm writing a buy-to-let feature for MORTGAGE STRATEGY looking at the particular challenges for private landlords. Any comment on the following points gratefully received

  1. Are you seeing an increased shift towards landlords buying or owning property through a limited company structure? What are the main advantages of this? Does it only really benefit those with two or more  properties? 
  2. Do you expect this trend to continue - is government legislation making it more difficult for ‘ordinary’ smaller landlords - perhaps with just one or two properties to operate in the buy-to-let market?
  3. Will yesterday's government U-turn on green energy efficient targets for homes help? Do you think this should have remained in place - particularly for larger commercial landlords? 
  4. Brokers aren't tax advisers - so how do you support clients who ask about whether they should structure as a limited company? 
  5. How has this shift towards more limited companies affected BTL market - is it one of the factors that has led to less supply and competition in this market, and is contributing to rising rents?

Any other comments about the split in BTL market between ‘private’ landlords and limited companies much appreciated. 

Comments by tomorrow lunchtime (Friday 22 September) particularly appreciated - but will be able to include if sent by Monday 25th September. 

7 responses from the Newspage community

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Editor
Mike Staton
Director at Staton Mortgages
The required rental income for affordability is rediculous and unachievable in most circumstances. This is forcing a lot of landlords out but this may be a good thing as I am seeing a lot of "homes under the Hammer" landlords leave the industry as they were living off the rental income instead of investing it and growing their portfolio. This isn't a bad thing and will hopefully lead to a better quality of investors and not just the cowboys that are in it for a quick win, we've seen the big housing reset, and now we are witnessing the big landlord reset.
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Elliott Culley
Director at Switch Mortgage Finance
Generally speaking, if you are a higher-rate taxpayer, it makes more sense to purchase through a LTD company due to the changes in mortgage relief brought in by George Osbourne. I always advise anyone looking at a new BTL mortgage to get advice from an expert to ensure they are proceeding the correct way. LTD Company buy-to-let is growing, but is usually a bit more expensive in interest rates and upfront costs than a personal buy-to-let.
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Joe Garner
Founder & Managing Director at Joe Garner Consulting
There has been a noticeable shift towards landlords opting for limited company structures to buy or own properties. The main advantage of this approach is the potential tax benefits it offers. This tax advantage can be particularly appealing for those with multiple properties, but it's not exclusively for them.
This trend is likely to continue, especially as government legislation has made it increasingly challenging for smaller landlords with just one or two properties to operate in the buy-to-let market.
The recent U-turn on green energy efficient targets for homes might offer temporary relief to some landlords, but it's essential to maintain a focus on environmental sustainability. The shift towards more limited companies has indeed contributed to less supply and competition in the buy-to-let market, leading to rising rents in some areas. This, coupled with other factors like increased demand and stricter regulations, has reshaped the landscape.
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Luke Loveridge
Founder and CEO at Eco Approach
The U-turn on energy efficiency won't help landlords; it will just bring more uncertainty.

The Labour Party has committed to bringing this regulation back at the next election, and with 20% of carbon emissions from residential property, 2 million properties in the private rented sector being below C, and £117bn of energy imports; this issue is going to have to be dealt with sooner or later. The can has been well and truly kicked.

What would have helped is extending (but confirming) the deadline, reducing the cap, adding in more exemptions, and the Government providing long-term 0% loans.
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Austyn Johnson
Founder at Mortgages For Actors
1. Ltd company is not always the best way for a FTL and we advise them to see their accountant and also go through the future plan. If you are only having one property, it may actually be more expensive. However, LTD company benefits cannot be ignored. They are becoming more popular now.
2.I think its worth noting that a lot of government people have rental property and second homes etc. They will press the smaller landlord down a bit, but not at the detriment to themselves.
3.We have been letting our clients know not to make huge improvements until the actual guidelines have been published and not just drafted. I feel sorry for the LL that spend thousands on things they didnt really need.
4."have you looked into tax advice? If not, heres a number for you to call"
5.The shift will mean clients are paying higher rates and fees, but it usually balances out with tax benefits. Usually, though that higher rate will mean higher rents. If it carries on, we will see a huge rental rise.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
With landlords flocking to limited companies, it's clear that tax perks are luring the big and small players alike. But this game-changer has a flip side: rents are going up and quality could be a toss-up. Government rules may come and go, but one thing's clear—going corporate might be a good play today, but be sure to check the scoreboard for long-term wins and losses. Keep an eye on those ever-changing guidelines; this isn't a one-size-fits-all solution!
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James Bull
Mortgage Broker at JB Mortgages
Mortgage brokers are not qualified to give tax advise so we try not to get too involved in advising clients if to buy in their personal name or via a limited company. This kind of advice is better left to the clients accountant and we always refer clients back to their accountant if they ask this kind of question. As limited company mortgages become more common, it would be good to see more lenders come on board with products to accept this niche market. Birmingham Midshires would be a particularly welcome entrant to the market should they wish to do so!