With buy to let landlords in the UK now facing paying more property tax and facing cuts to mortgage tax relief, increasing numbers are considering moving their property investments into limited company vehicles.
Some 41% of 1,400 landlords taking part in a survey commissioned by Paragon Mortgages indicated that they are considering moving their portfolio into a limited company following the Chancellor’s decision to limit tax relief available to landlords last year.
A further 5% have already established limited companies. For larger landlords with 20 or more properties, 14% are already operating as limited companies, while 63% are considering it.
In terms of portfolio growth, 43% of landlords surveyed agreed that the stamp duty increase will affect their buy to let purchasing plans over the next couple of years. This figure rises to 63% for larger landlords with 20 or more properties.
Despite uncertainty about what impact the changes to tax relief and stamp duty might have however, tenant demand amongst landlords is still perceived as being high.
Demand for rented property in the fourth quarter of 2015 was strongest in the South West where 40% of landlords reported demand to be rising. Landlords in the North East experienced the weakest demand, with just 24% of landlords reporting increased demand.
Reflecting this demand, average yields have also remained stable and averaged 5.6% across the country, unchanged on the previous quarter. The North West saw the highest yields, at 6.2%, while outer London had the lowest, at 5.1%.
‘Recent government interventions into the buy to let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however, tenant demand and yields, remain strong so there are competing dynamics at play,’ said John Heron, director of mortgages at Paragon.
‘It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp-duty on buy to let purchases,’ he added.