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Commercial Trust warns landlords over limited company incorporation

A specialist buy-to-let mortgage broker has urged buy-to-let landlords to take a cautious approach and seek expert advice when it comes to incorporating their property business into a limited company.

There has been a rise in the number of buy-to-let landlords incorporating, according to recent press reports, with the recent tax changes in the sector – including the phasing out of mortgage interest tax relief and the additional 3% surcharge on second homes – making it an increasingly popular move.

The introduction of stamp duty and the phasing out of mortgage interest tax relief are both fairly recent measures (coming into play in April 2016 and April 2017 respectively), with the changes resulting in some landlords reassessing their property businesses and deciding to incorporate.

Commercial Trust Limited, however, is sounding a cautionary note as lenders predict there will continue to be a growing move towards limited company buy-to-let activity for the rest of the year. 

Andrew Turner, chief executive at the broker, said: “Whilst it is understandable that buy to let landlords want to avoid paying more tax than is necessary, it is essential, as with any investment, that they fully investigate how their personal circumstances apply to buy to let taxation.”

He added: “Upon face value, many landlords are perhaps seeing the headlines and are considering incorporating their property investments, as limited companies are taxed differently to individuals.”

He warned, though, that taxation is a complex issue and urged anyone considering this move to seek advice from a tax specialist first, to ensure that their buy-to-let venture would actually be better off, tax-wise, in a limited company.

“Having done so, we would be delighted to help any landlords that then want to consider investing in buy to let as a limited company,” he continued. “There are a wide range of lenders and products that are available and based on individual circumstances. But the message should be clear to landlords thinking of taking the limited company option, to investigate fully first.”

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