Radio host Ian Collins spoke to Michael Cook, Group Managing Director at Leaders Romans Group, and Mark Frame, Senior Director at GetGround, about the growing trend of landlords setting up a limited company to purchase a buy-to-let property. Listen here on Spotify.
A recent survey from Paragon Bank suggests the number of landlords aiming to set up a limited company to purchase a buy-to-let property reached 62% in the second quarter of 2022, up from 50% in the first quarter of the year. According to Paragon, this is the highest proportion of landlords in the last three years that have indicated they are moving to a limited company.
Although some landlords have been investing in buy-to-let via a company for many years, the trend has increased rapidly since April 2017, when the Government decided to phase in changes to the rules on how mortgage interest was taxed. By April 2021, none of the interest paid on buy-to-let mortgages could be deducted from rental income; instead, investors filing self assessment tax returns would apply a relief of 20% to the cost of mortgage interest and other finance costs. This typically penalised higher-rate taxpayers who could, in the past, have claimed 40% or more tax relief.
Meanwhile, those that invest through a limited company are still allowed to deduct finance costs from their rental profits so, on the surface, that may seem a more attractive option for landlords.
However, it’s important to be aware that this is not straightforward and there are a number of factors that can affect whether such a move would be beneficial overall to you. So, if you’re considering making new investments via a limited company, you will need expert advice.
Only once all the pros and cons are properly taken into consideration, can you assess whether investing via a limited company is the right thing for you.
It’s worth finding out if investing in buy-to-let via a limited company could be right for you. Our Smart Investment service, powered by GetGround, helps property investors set up and manage their own limited companies in a way that is safe, secure and hassle-free... In the 12 months to end August 2022, the number of incorporations GetGround facilitated per month increased 2.5x, proving it is a growing trend for landlords. Find out more information by getting in touch with your local expert.
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