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Very quick one: to what extent do limited company structures keep the BTL market afloat?

Journalist: Carmen Reichman, FTAdviser

ended 07. September 2023

Dear mortgage advisers

I'd need a quick comment for a news story on LC structures: to what extent do limited company structures keep the BTL market afloat?

Fire away. Thank you!

10 responses from the Newspage community

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Editor
Michelle Lawson
Director at Lawson Financial
Most of my new purchases for Buy to Let are now held by Limited Companies as it is more tax efficient for most landlords following the Governments constant decimation of the sector and removal of Section 24. Paragon has reported today that 74% of landlords looking to invest in the coming year will do so via Limited Company.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Limited company products massively help the Buy to Let market, as despite rates for the products being higher, they benefit usually from a lower stress test on the rental calculation allowing more scope for borrowing needs. Also as a limited company, landlords can still offset the mortgage interest against their tax bill, which for larger portfolio landlords can be a massive saving on tax.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The benefits of holding property under a limited company framework may be keeping high-rate and additional-rate taxpayers in the rental market, especially with the recent surge in rate increases.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Ltd Company structures are a massive benefit to the BTL sector. From the creation of Directors' loan accounts, and advantageous tax and pension provisions, to lower stress testing, limited companies are market enablers. Owning personally and the punitive taxation will likely soon become a minority setup in the sector.
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Elliott Culley
Director at Switch Mortgage Finance
Limited companies offer higher rate and additional rate taxpayers a way of remaining in the buy to market space. With the tax rule changes made by George Osborne making it far harder to turn a profit. They also have better affordability stress tests which again can help higher rate and additional rate taxpayers borrow a higher amount.
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Graham Cox
Director at Bridging Hub
As mortgage rates for landlords have skyrocketed this year, using a limited company, specifically a special purpose vehicle (SPV), is becoming essential to maintain a profitable business.

There are tax advantages with an SPV, particularly for higher-rate tax payers. Plus SPV's can usually borrow more, as the rental cover required is lower, typically 125% of the lenders stress test rate, rather than 145% if the property is held in a higher-rate taxpayers name.
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Richard Campo
Founder at Rose Capital Partners
Ltd Co lending has become essential in the Buy To Let market, especially for higher earners.
Depending on the lender, this can boost lending up to 26% vs. borrowing in your personal name. That is also before you get to the tax treatment which is far more favorable if you use a Ltd Co. While we are not accountants, I always recommend every client get tax advice before buying a Buy To Let now as that can have a huge sway on the lender/product/loan available.
It can be the difference between a purchase being viable and not, as if you buy in your own name, assuming you can get the loan to fit the lenders stress tests, you then can't offset the interest at present which can lead a client to having to fund a highly leveraged purchase
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Charles Breen
Founder at C B
The decline of part-time landlords is evident as the private rental sector undergoes a significant transformation. Portfolio landlords are now the dominant players, reflecting a growing trend toward greater professionalism in property investment. This shift has fueled a substantial demand for limited company buy-to-let mortgages. The transition from occasional and unintentional landlords to more dedicated investors, who prefer limited company buy-to-let financing, has undeniably been instrumental in sustaining the market, particularly in the face of rising interest rates. Notably, there has been a noticeable uptick in landlords who own one or two properties opting to sell and exit the industry.
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Samuel Bull
Senior Mortgage Broker at JB Mortgages
Whilst many landlords still have their buy-to-let portfolio in personal name, limited company mortgages may help keep the BTL market afloat with the lower rental stress tests, meaning affordability can still be maintained during this period of higher interest rates.
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Amit Patel
Adviser at Trinity Finance
Stress rates are more favourable in a limited company structure and landlords benefit from the tax advantages associated with holding properties within a limited company.