COMPANY LETS AT HIGHEST LEVEL SINCE 2011
According to research from Hamptons International, companies now let more than one in ten properties. This is at its highest level since 2011 and shows a rise of 9% since 2015.
Company landlords currently own 641,480 buy-to-let homes in the UK, which is a 42% increase on four years ago. In London, buy-to-lets are most likely to be owned by a company.
Research by SevenCapital, a leading UK property developer, reveals only 9.7% landlords are opting to invest in property as an individual while 42% invest through a limited company with 48% either planning to, or interested in, changing to a company.
WHY CHANGE TO A LIMITED COMPANY?
Changes in mortgage interest tax relief were introduced in April 2017 for non-company landlords. Before this time, private landlords were allowed to deduct mortgage interest and other costs associated with rented properties from their rental income before they calculated their tax.
Tax laws changed, and the amount of mortgage interest individual landlords could write off dropped. However, if a limited company owns the property, the regulations are different, and more expenses can be deducted for tax purposes, including mortgage interest payments.
Operating as a limited company provides other advantages as well as tax efficiency, it also protects property investors from some personal liability.
The downside of starting up a limited company is that landlords are counted as a business, and with this comes other expenses. Plus, landlords have to take their income in the form of a dividend and pay corporation tax rather than income tax.
HAVE THESE CHANGES PUSHED UP RENTS?
According to Hamptons, the average cost of a new let in this country increased to £986 pcm in June. Growing rents in the south are driving this 3.1% year-on-year rise. The strongest rental growth was recorded in the south-west, where rents increased 4.5% annually.
Head of Research at Hamptons International, Aneisha Beveridge, “More than one in ten rental properties are now owned by private companies, an indication that the sector continues to professionalise. Increasing taxation for private landlords combined with the growth of the build to rent sector has meant that more companies are letting homes than at any time since our records began. London, where landlords tend to have higher levels of debt and often the most to gain from corporate ownership, has the largest proportion of homes let by a company. However, it’s not always more profitable to put a buy-to-let into a company as other associated costs come into play. Strong rents in the south drove rental growth in Great Britain in June. Low stock levels, particularly in the south, continue to put pressure on rents. Rents rose in six out of eight regions in Great Britain, with the east and Wales recording small falls.”
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