Only Professional Investors In Buy To Let Now, Apparently

Or, as it may be, The Times has missed something rather important here. There has indeed been a change in the form of buy to let investors, entirely true. But that change in form may well not be quite as identified:

The era of the amateur buy-to-let investor is all but dead, with banks advancing only a few dozen loans to them every day, lending figures show. At the market’s peak in 2007, banks issued 16,000 buy-to-let loans every month for house purchases. In February, that figure had fallen by two thirds to 4,800, only 170 a day, according to UK Finance, the banking trade association. A quarter of these were to amateur investors, with the majority of loans now being taken out by professionals with multiple properties trading through limited companies, mortgage brokers report. The figures show that buy-to-let lending has fallen by half over the past three years after a 3 per cent stamp duty surcharge was introduced on property purchases by existing homeowners.

It’s the trading through limited companies bit. The tax situation has changed remarkably. As an individual you now face hefty tax bills, bills that you don’t if you stick a £50 limited company in between you and the revenue flow from your buy to let property. So, what are people doing? Buying a limited company to run their buy to let through.

Now, entirely willing to believe that the market is also changing as described. But at least part of it is just that – well, tax avoidance? – change in form as a result of the change in tax.

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James Mitchinson
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James Mitchinson

You can’t just transfer your BTL property into a company for £50. The new company has to buy them from you at market rates which will incur stamp duty and possibly a hefty CGT bill as well as normal transaction costs. You would also have to redeem the current BTL mortgage and re-apply for a new corporate BTL mortgage. For most people the costs will way outstrip any potential tax savings.

timworstall
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timworstall

The numbers being reported as the basis of the story are not the stock of loans. They are portions of new issuance. So, more of the new issuance is to BTL investors using a £50 company instead of personally.