The National Landlords Association have witnessed a doubling in landlords considering commercial loans as their members seek to avoid the upcoming changes to taxation (which will bring an end the deductions for interest payments and other finance-related costs from turnover ).
The NLA report landlords planning to use commercial loans has risen from 10% in July 2015 to 19% at the end of 2016.
Approximately 100,000 landlords established limited companies in 2016, leaping from just 1% of landlords to 6% during the course of the year.
Richard Lambert, NLA chief executive comments
“Over the last year more than one hundred thousand landlords have formed a limited company in order to beat the tax changes, and this overlaps with an increasing intention to look to commercial loans to fund future purchases
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 recent track record in mind, we’d advise any landlords who have yet to incorporate to wait to see whether a consultation is launched in the [March 8] Budget before making a decision.”
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