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Renewed concern over buy-to-let landlord-companies

A critic of the suggestion that buy-to-let landlords could set up companies to ‘beat’ the ending of tax breaks has renewed his concern at the tactic.

Last week Landlord Today’s sister site Letting Agent Today reported that accountancy firm Jeffreys Henry LLP was warning that there were pitfalls in this approach – transferring existing property into a limited company may incur a Capital Gains Tax and Stamp Duty Land Tax liability. 

It suggested that some existing landlords may be better off shifting rental income to spouses on lower tax bands before looking at creating limited companies.


Now Bhimal Hira of Jeffreys Henry has told Letting Agent Today: “Almost every landlord I have spoken to since the budget is asking about a limited company but one of the biggest barriers and always overlooked (apart from the upfront tax costs) is buy-to-let mortgages.

“Generally, unless you’re a serial buy-to-let landlord with a proven track record, high street lenders won’t lend to a limited company. There are a very, very limited number of specialist finance providers that do – but their arrangement fees and interest is much higher, and again, they only lend to established landlords with a proven track record and multiple properties.”

In the budget in early July, Chancellor George Osborne announced that mortgage interest payments and arrangement fees incurred when taking out buy-to-let mortgages will be restricted to the basic rate of tax, currently 20%.

This will be phased in over four years from April 2017.

Under current rules, a 45% taxpayer with an annual rental income of £10,000 and annual mortgage interest of £6,000 would get a tax bill on the rental profit of £1,800. But this tax bill could rise to as much as £3,200 under the new plans.

Immediate reaction to the news suggested that landlords setting up companies might be a way of circumnavigating this extra liability.

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