News
Commercial loans being used to fund property purchase on the rise
Wednesday 1st March 2017
The number of landlords intending to take out commercial loans to fund their property purchases has doubled over the last 18 months, as investors look for ways to avoid the forthcoming changes to landlord taxes.
According to a study by the National Landlords Association (NLA), found the number of landlords who said they were planning to use commercial loans has risen from 10% in 2015 to 19% at the end of last year.
The rise in proportion of landlords looking to use commercial loans coincides with a 500% increase in the number of landlords who have formed a limited company over the past year. This has grown from 1% in January 2016 (around 20,000 landlords) to 6% by the end of last year (approximately 120,000). The benefit of holding properties as stock in a limited company is only corporation tax at 20% on profits only is payable, thus avoiding the imminent tax changes due in April this year.
The CEO of the NLA, Richard Lambert comments "While commercial loans are available to non-incorporated landlords, they tend to be a source of funding more commonly used by limited companies looking to expand their property portfolios; so we'd expect to see this trend develop as the year plays out."
"However, we know that the Treasury is concerned by the drop in tax revenues as a result of businesses across the economy incorporating to reduce their tax bills, and the Chancellor hinted at a review into the matter during his Autumn statement last year. With this government's track record in mind, we'd advise any landlords who have not yet to incorporate to wait and see whether a consultation is launched in the budget before making a decision."