More companies are investing buy-to-let properties with mortgage applications soaring in the past few months.
Registered companies now account for more than one-third of applications for buy-to-let mortgages, according to the latest figures. In October, their share of the market stood at just 15 per cent, so this is a significant rise.
The increase comes about as landlords and property investors find ways in which to avoid the extra 3 per cent stamp duty being imposed on second homes and buy-to-lets by George Osborne.
According to a report in Money Mail, banks have responded positively to the move by approving cheap loans for registered companies. Some lenders are also cutting interest rates on buy-to-let mortgages to bring them in line with the rates for individuals paying mortgages. Other banks and financial institutions are also expected to launch mortgages specifically aimed at companies in the buy-to-let market.
It is widely believed that even more property investors will look at setting up companies to own buy-to-lets rather than owning them in their own name as a means by which to avoid higher tax bills.
Previously, investors who owned properties in their own name paid income tax on the profit after deducting mortgage interest rates and other costs such as repairs. However, in last July’s Budget, George Osborne announced that mortgage interest could not be deducted. This would hit higher-rate taxpayers particularly hard.
He also introduced the additional stamp duty of 3 per cent, which could deter investors from buying additional properties for the rental market.
The way around the new taxes appears to be property ownership through a company because firms with 15 properties or more within their portfolio are exempt from the tax hike. However, limited companies need to file annual returns and accounts, so these costs need to be taken into account if you are considering starting up a company.
Setting up a business may seem straightforward but investors may want to look at ways of freeing up their time. In addition to employing an accountant or book-keeper to keep on top of the invoices and accounts, they may want to reduce the time spent on administration.
Software is available to take care of property inventory reports, inspections and checking tenants in and out of properties. Using any online device such as a phone or tablet, you can complete your inventory reports or checks immediately. You can also take photos, make checklists and record voice notes while you are at the property which means that you don’t have to fill in forms when you return to the office.