The buy-to-let market has gone through significant change in the last year and with the Budget just around the corner, what comes next is anyone’s guess.
The changes, whether focused on Stamp Duty or the restriction of mortgage interest tax relief, have been intended to stem the ‘out of control’ nature of the market and while the jury is largely out on whether this has or will be achieved, there’s no denying that savvy landlords have sought to keep their investments profitable.
Recent reports in this respect suggest that during 2016, the number of purchases made through a Limited Company structure increased each quarter to 69% by Q4 – a significantly higher level than before the taxation changes were announced in July 2015.
Indeed, the debate around the benefits, or otherwise, of incorporation is one that we see raised more and more often through our programme of landlord-focused Property Sessions.
The landlords we work with are keen to investigate the options around purchasing new properties through a Limited Company and, indeed, transferring existing portfolios over to such a vehicle. Interestingly, they’re also keen to know how it might affect their relationship with us too.
This is something I briefly pondered early on and I imagine others of you will have encountered the “Will becoming a Limited Company affect the agent/landlord relationship?” question too.
Simply, the answer is that a shift to Limited Company status does not change the agent/landlord relationship: whether purchased by an individual or a company owned by an individual, our role remains to match that property with the most suitable tenant, whilst serving the needs of the landlord.
We do, however, maintain a responsibility to make the landlord’s experience as stress-free, positive and financially viable as possible – and it is here where I believe the industry needs to do its homework.
While the choices to be made around rental property purchase and ownership are essentially issues of taxation, we need to ensure that we have an awareness of the basics of tax law for both our landlords who privately own their properties and those who own via their own Limited Company.
We must be prepared to signpost those clients to reputable tax advisers, small business accountants and investment specialists, while closely monitoring legislative changes so that we’re ahead of the curve on further changes too.
So, while an increase in the number of Limited Companies owning rental properties shouldn’t have any fundamental impact on our relationship with landlords, it will only be by building these strong networks and keeping abreast of the future landscape of the market, that we can be sure of serving our landlords effectively over the longer term.
I, therefore, call on my peers throughout the industry to demonstrate their commitment in this respect and stay ahead of the curve – whatever that may bring.
*David Westgate is Group Chief Executive of Andrews Property Group