Landlords look to limited companies in response to tax changes
Growing numbers of landlords are looking to take out commercial loans or set up limited companies in a bid to outmanoeuvre tax changes.
According to the National Landlord’s Association (NLA), the proportion of landlords planning to use commercial loans has increased from 10% in July 2015 (when the tax changes were first announced) to 19% at the end of 2016.
As well as an increase in interest for commercial loans, the NLA reports a 500% in the proportion of landlords who have formed limited companies in the last year.
By turning a property into a limited company, landlords will be able to sidestep these tax changes.
The changes to taxation will see landlords lose their ability to claim mortgage interest tax relief, and this will be phased in from April this year until 2020.
Critics of the tax change have argued it will leave landlords with no option but to increase rents, increasing the financial burden for tenants.
However, Chief Executive Officer at the NLA, Richard Lambert, warned landlords that the Chancellor may clamp down on limited companies in his Spring Budget: “With this government’s recent track record in mind, we’d advise any landlords who have yet to incorporate to wait to see whether a consultation is launched in the Budget before making a decision.”
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