The number of company landlords in the UK has reached record figures as investors look for ways to negotiate buy to let legislation.
One in five UK homes in the rental sector are now owned by companies, according to new research from Countrywide. This marks a 6 per cent jump since the first quarter of 2016, the biggest rise on record. The growth is likely stimulated by landlords purchasing properties as a limited company in order to make the buying process more tax efficient. This follows government changes to income tax relief on mortgage interest payments, in action since April. The measures will be phased in over a two-year period, culminating in 2020.
Former Chancellor George Osborne unveiled the change in 2015 which removes landlords’ ability to deduct the cost of their mortgage interest from their rental income when they calculate their taxable profit. This could lead to a doubling in payable tax for some landlords, pushing many of them into loss-making territory. As a result of this, some landlords have been looking to sell their properties, whilst others have concentrated on expanding their portfolios but acting as a limited company.
The company landlord phenomenon is mainly concentrated in London, with 27 per cent of properties owned by a company landlord, a far higher figure than any other location across the UK. In second place, but by a significant amount, is Yorkshire and the Humber, within which 17 per cent of buy to let properties are owned by company landlords.
Research director at Countrywide, Johnny Morris, said: ‘The incoming tapering of mortgage tax relief is likely driving the increase. Companies are generally taxed more favourably, particularly with recent changes by government to tax relief, so in many cases landlords can make cash savings by operating through a company rather than as an individual.’