Buy-to-let investors losing out from being in a limited company

Jessica Nangle

June 28, 2017

Buy-to-let investors could lose £1,000 of income per year by purchasing through a limited company due to higher mortgage costs.

The analysis by Private Finance says a limited company borrower can expect to pay 3.41% for a 2-year fixed 75% LTV mortgage deal compared to 1.92% for personal borrowers.

The findings said only landlords with multiple properties benefit from a limited company structure, with four or more being the tipping point.

Together reveals changes for buy-to-let portfolio landlords

Shaun Church, director of Private Finance, said: “The option to invest through a limited company has come under the spotlight recently as landlords look for ways to offset recent tax changes.

“Limited company mortgage products are available through a handful of smaller lenders, resulting in higher rates compared to personal borrowing.”

Landlords investing through a limited company are excluded from recent tax changes that will see mortgage tax relief phased out over time.

The restriction will be complete from April 2020 but for most landlords the high cost of limited company mortgage borrowing will outweigh any tax advantages.

Church added: “Larger landlords might find the tax benefits associated with limited company ownership outweigh the higher cost of mortgage borrowing.

“Each investor is different and there’s no one-size-fits-all solution.”

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  • Mark Chase

    Where are the figures to back this up? How can paying an extra 1% on the loan be better than paying 5% tax in the interest? And of course the tax will increase year on year and for some could end up at 40%