Company property ownership and UK mortgages: Why does it matter?

When then, Chancellor George Osborne effectively made mortgage interest costs disallowable for tax purposes, though using a phased in approach, prudent #landlords, especially those on higher rate and additional rates of income had a significant cost addition added to their annual bills. Though a basic rate tax relief was introduced to protect small buy to let landlords, the net effect was a tax on mortgage interest payments.

In the aftermath of the above 2017 regulatory changes in property taxation, a significant number of landlords took advantage of then prevailing low #mortgages interest rates to refinance their portfolios while transferring the ownership into a company or companies. Those with sizeable equity values were prepared to use a portion of the equity to finance a one off stamp duty land tax (#sdlt) payment. During this same period, finance markets was also receiving more attention from regulators, yet #mortgage lenders' appetite to lend to property companies increased as opposed to their previous reluctance to lend to companies.

Reporting on the trend on company ownership of UK properties based on data from companies house, the financial reporter noted that, 'the BVA BDRC Landlord Survey carried out in Q2 of 2022 reveals that 77% of landlords still hold their buy-to-let properties in their personal name, rather than in a company. Since interest relief was finally phased out altogether in April 2021, it is logical to conclude that many more landlords currently falling within that 77%, particularly higher rate taxpayers, will look to buy investment properties in, or convert existing properties to, limited company status going forward. Indeed, the survey reveals that 62% of landlords intend to purchase their next investment property within a company structure, rising to 78% of those with six or more properties in their portfolio'.

Higher rate and/or additional rate landlords with #properties owned in personal names and whose fixed rate #mortgages are coming to their term end are likely to gain significant value in the long term if they transfer their property ownership into a company. This is even made easier when refinancing since the SDLT cost can be paid for within the same financing transaction. This will effectively reduce the income tax exposure while allowing the landlord to explore efficient ways to earn income from their owner/managed companies.

Thankfully, both high street and specialist lenders have a very high appetite to lend to small and big #propertyinvestment companies alike.

Contact us at PWO Finance for your Unregulated Mortgages: Bridging finance, Development finance, Commercial finance and Buy to let, including Expats and Foreign National Mortgages!

Email or message me for discussions about UK property investments and mortgages for both Small and large UK Residential and Commercial Property businesses. We also work with Expats and Foreign nationals interested in buying UK properties using UK mortgage lenders to finance the purchases.

The article is for general information only and not intended to be advice to any specific person. You are recommended to seek professional advice before taking or refraining from taking action on the basis of this publication or other publications and contents of this page.