Over a third of landlords plan to form property companies after recent buy-to-let tax changes

Buy-to-let tax changes have hit landlords hard over the past few years, from the three per cent stamp duty surcharge for investment properties, to the phasing out of mortgage interest tax relief.

Different property gurus have recommended different strategies for coping with all these changes, but one piece of advice we’ve been hearing a lot lately is that landlords should consider setting up a property company - and it seems people have listened.

36 per cent of landlords plan to set up property companies

A recent Simply Business poll has found that over a third of landlords plan to set up a property company in order to try to alleviate the financial burden these tax changes will cause.

Of the 151 landlords polled, 23 per cent said they intended to form a limited company to manage their buy-to-let properties, while a further 14 per cent were interested in setting up a beneficial interest company trust.

One of the suggested advantages of creating a beneficial interest company trust is that landlords wouldn’t need to remortgage properties, as is almost always required when setting up a traditional limited company.

However, accountants have warned landlords to be careful when it comes to setting up companies as HMRC could well crack down on those it sees as trying to dodge taxes. So if you’re planning to set up a property company, make sure you take expert advice before you make the move.

Landlords to raise rents and convert mortgages

For those not planning to set up a limited company, raising rents and converting mortgages appears to be an attractive option.

Nearly a quarter of landlords plan to raise rents to combat tax changes, while 11 per cent are considering converting their interest-only mortgages into repayment plans.

However, a fifth of landlords appear to be unfazed by the slew of tax changes, with 20 per cent of respondents saying they didn’t plan to do anything to mitigate the changes coming in. Of course, for landlords who don’t plan to expand their portfolios and who have mortgage-free properties, the tax changes are going to make little impact at the moment, though it’s worth keeping in mind that the ban on letting agent fees could well act as a further tax on landlords.

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