The number of landlords planning to use commercial loans has increased by 9% since the tax changes were announced, according to research from the National Landlords Association (NLA).
Buy-to-let tax changes were announced in the Summer Budget in July 2015. At this point, 10% of landlords planned to take out commercial loans. By the end of 2016, this figure had risen to 19%.
Landlords have been hit by a series of measures designed to slow buy-to-let investor activity, and these tax changes are one such measure.
The tax changes – which will prevent landlords from being able to deduct all of their mortgage interest when working out their income profits – will be phased in from April this year.
As a result, landlords are exploring other ways to hold onto their profits. This includes turning their rental properties into HMOs or limited companies.
By turning their properties into limited companies, landlords will be exempt from these tax changes. It's not surprising, therefore, that in the last year the number of landlords forming limited companies rose by 500%.
However, landlords are being advised by the NLA to wait and see what the Chancellor says in the Spring Budget before making a decision on forming a limited company.
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