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Is Now The Time to Incorporate Your Property Portfolio?

Ranjan Bhattacharya comments on a very topical matter for many landlords

Until recently, most people would have started their property investing careers as sole traders. The decision to operate as a sole trader was largely driven by easier availability of Buy To Let (BTL) mortgages. Obtaining BTL mortgages for a limited company used to be more difficult due to the scarcity of available mortgage products and the loaded interest rate which applied to the loan.

In July 2015, George Osborne introduced what is now known as Section 24. This fundamental change meant that individual owners of residential, mortgaged, BTL property, could no longer claim their mortgage interest as a tax-deductible expense of running their BTL business.

As Landlords crunch their figures, leveraged landlords are discovering that Section 24 adversely impacts their profitability and in many cases, the financial viability, of their BTL property portfolios.

New Investors Are Buying In Limited Companies
Section 24, together with the new PRA (Prudential Regulation Authority) rules affecting lending to portfolio landlords has now made buy-to-let investment unattractive for most sole-traders.

Figures from the CML (Council of Mortgage Lenders) support this and show that BTL mortgage take-up by sole trader landlords has halved since this time last year.

To combat this loss of business, mortgage lenders have taken increasing interest in lending to limited companies. There are now many more limited company BTL mortgage products available and this increased competition has reduced costs traditionally associated with limited company borrowing.

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