Buy-to-let uncertainty is not over yet

27 Mar 2017

Has the chancellor laid the groundwork for changes for those using limited company vehicles to purchase buy-to-lets?

How has Q1 been for you? I think things have started relatively well. Transaction numbers are holding up, lender competition remains strong and there is a level of diversification not witnessed for some time, particularly among building societies.

The potential elephant in the room is, of course, the buy-to-let sector. Like many, I have a degree of uncertainty about how it will react to a growing number of outside influences.

While some recent surveys suggest the majority of landlords are fully cognisant of the forthcoming taxation changes and the impact they will have, I am going to maintain a healthy dose of scepticism on this.

Only when the changes hit – and landlords see what they mean for their rental income and profit margin – will we be able to properly gauge the sector’s reaction and how landlords may alter their practices.

Clearly, the move towards purchasing via a limited company vehicle has developed momentum and 14 lenders now cater for such activity. Will more follow? I suspect so.

But one wonders whether the short-lived status quo may be jettisoned again, particularly given the ongoing review into the use of corporate vehicles as tax mitigators.

I realise advisers cannot advise on changes that have yet to be introduced (and may never be), but in his recent Budget the chancellor appeared to be laying the groundwork for changes for those who use limited companies in this way.

Understanding a changeable buy-to-let sector is even more important when you consider the PRA’s portfolio landlord changes, due to be introduced in September.

Uncertainty also abounds here: lenders will all interpret these new rules differently, as they did with stage one of the underwriting changes.

Bob Hunt

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