Buy-to-let: Increasingly taxing or business as usual?

This period always reminds me of the old HMRC adverts which proclaimed: ‘Tax doesn’t have to be taxing’. In reality, constant changes – especially for landlords – means that it remains far from simple.

Tax changes within the buy-to-let arena have been well documented but that shouldn’t stop landlords, and intermediaries, from being fully aware of any specific tax implications for 2019/20 – in terms of the potential impact on portfolios and personal finances. In recent times, regulatory changes have been plentiful in the buy-to-let sector and whilst the Government has certainly not forgotten about it, thankfully the Spring Statement added little to cause any further concern for landlords. Meaning it remains business as usual.

But what is business as usual?

This is a big question. The needs of many landlords have shifted, as has the focus of some lenders. More activity is taking place at the more ‘professional’ end of the market. Although we can’t, and shouldn’t, ignore landlords who are content in owning investment properties as individuals, the changing nature of buy-to-let – especially when focusing on recent tax changes – has made the option of borrowing through a limited company far more attractive than in times gone by.

This was highlighted in research from Precise Mortgages which outlined that nearly two thirds of landlords – 64% – with four or more properties intend to use limited company status for new purchases this year. This marks a significant rise from the 41% figure recorded in Q1 2018. Meanwhile, 21% of landlords with four or more properties intend to buy more as an individual.

While 44% of landlords across the market who plan to buy will use limited company status, just 17% of those with one to three properties share this intent. The research, taken from a landlords panel assembled in partnership with the National Landlords Association, also found that more than six out of 10 landlords planning to fund new purchases this year will use buy-to-let mortgages.

The data reflects much of what we, as a business, are experiencing on a daily basis. There has been an uplift in limited company enquiries which also emphasises the rising importance of lenders at the more specialist end of the buy-to-let sector and the value of the advice process. And, whilst purchase activity is relatively subdued in what remains a tough economic climate, there is certainly enough positivity amongst lenders, landlords, investors and developers to suggest that opportunities will continue to arise for the intermediary market.