If you own less than four properties, don't incorporate

We're here to help - available until 10pm

Free Valuation
Back to latest news
26 Jul 2017

Landlords, this is how many properties you need to make ‘incorporating’ worthwhile

Author: Michael Cook

The government are slowing phasing in changes to the tax relief landlords can claim on their mortgage repayments. As reported in our recent blog, the changes came into effect in April 2017 and by April 2020, landlords will no longer be able to claim tax relief on their mortgage. Many landlords who are keen to avoid this change think becoming a limited company is the solution.

However, Romans’ Lettings Director, Michael Cook offers some words of warning: “The savings made by retaining mortgage interest relief may not counteract the high cost of a mortgage deal for a limited company.

Landlords shouldn’t rush into assuming this is a safe-bet for saving money, every investor is different and what works for one may not work for another. It’s vital that you seek advice from a professional financial advisor to ensure that you really are making a saving by ‘incorporating’.”

With only a few companies offering mortgages to limited companies, rates are often higher when compared with personal borrowing, negating any savings made by being able to claim tax relief on the mortgage repayments. Limited companies receive different interest rates to buy-to-let investors, for example, a limited borrower can pay 3.41% for a two year fixed 75% loan to value mortgage deal, compared with 1.92% for a residential borrower, according to research from Private Finance.

Repurchasing an existing property into a limited company incurs Capital Gains Tax and Stamp Duty, eating into the savings made from regaining mortgage tax relief on the mortgage. Private Finance’s analysis found that for a limited company structure to be financially beneficial, the landlord must own four or more properties.

Whilst rates for buy-to-let mortgages are higher than residential mortgages, the increased competition between lenders coupled with the low interest rates has led to some great deals for investors. Landlords may find that remortgaging in order to secure a better deal is a more cost-effective way to regain their losses.

Michael adds: “Romans Mortgage Services have already helped hundreds of landlords secure a better mortgage deal, helping them to negate the tax changes being rolled out by the government. We recommend that all landlords regularly review their mortgages to ensure they are getting the most competitive deal for their circumstances.”

To find out more about how to maximise your buy-to-let profits, speak to a member of our investment team on 01344 985 699

Ask The Expert

Get answers to your property questions

View experts

Follow Romans

Like Romans on Facebook

Latest News Stories

The service was excellent throughout the process and made moving a simple and enjoyable experience " R. Swiatek

FIND OUT THE CURRENT MARKET VALUE OF YOUR PROPERTY. BOOK YOUR FREE VALUATION.