In a report for Mortgages for Business, it recently came to light that over half of all new BTL mortgage approvals go to landlords with a registered limited company (59%). This is the first time that limited businesses have beaten applications from landlords who operate as sole traders. It marks a fundamental shift from the small outfit to registered businesses. If you’re considering this change, you should know there are many reasons for registering a business.

Wide Choice of Lenders

The report suggests not only that more businesses are being registered, but also that mortgage lenders are more willing to approve mortgages to businesses than they are to individuals. Because of this trend change, you will find far more options for opening a new mortgage for the purpose of BTL or re-mortgaging existing properties to expand. At such a critical time when some people are leaving the industry for good, it may be a wise choice. In an ever-expanding student market, you don’t want to miss out.

General Tax Advantages

Tax is always a double-edged sword for BTL property owners. Those without registered businesses have much simpler tax and are not subject to corporation taxes. When operating as a registered business, you will pay corporate taxes, but you can withdraw dividends from the business rather than a wage; ergo, you’ll pay less personal tax than a sole trader. You will, however, pay more business taxes. The good news is this rate drops to 17% from April 2020.

Coupled with the changes to mortgage relief (explained in the next point), there are now significant advantages to registering a limited business.

Mortgage Relief

One of the most complained about issues for buy to let landlords over the last couple of years has been the loss of mortgage relief. Announced in 2015, by 2020 all landlords will be able to claim a maximum of 20% tax relief against mortgage interest as a business expense. By spring next year, landlords not operating a limited business will pay more tax against their rental income than those who do. If for no other reason, a ltd company will improve cashflow and profitability.

Better Affordability Calculation

Terms regarding rent affordability are much more favourable to the borrower than a mortgage taken out based on a person’s personal circumstances. If you own multiple properties or intend to expand soon, the wisest course of action is to consider setting up a limited business soon. Your chances of acceptance are much higher. Plus, the assessment would calculate the profitability (or projected) of the business as well as a lower rent affordability.

This has particular advantages in the student rental sector due to the traditional high demand and better yields.