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Are your clients looking to invest in buy-tolet ? According to the latest rental market report from Zoopla , demand for rented homes is 10 % higher than this time last year ( 1 ) .

Whether they ’ re looking to purchase a standard buy-to-let property or already manage a large portfolio , they ’ ll need to know about their possible ownership structure options before they go ahead .

There ’ s a lot to consider , so it ’ s always important they speak to a qualified tax adviser and seek legal advice too .

What ’ re the differences between personal , joint and limited company ownership ?

Personal ownership

Personal ownership is used when an individual client purchases a property in their name .

When the first buy-to-let mortgage was launched in 1996 , those attracted by the promise of rental income and capital growth found that a personal ownership structure was the simplest way to look after their investment .

However , with mortgage interest tax relief phased out and changes implemented to taxation and legislation , growing numbers of private landlords have either exited the sector or looked at different ways to run their business .

Joint property ownership

Joint property ownership could be used if your client is purchasing a buy-to-let property with a spouse or business partner .

Typically you may find spousal partners using joint tenant ownership and business partners using tenants in common , however the type of ownership really depends on their circumstances . There are some essential considerations below to help you look at your clients ’ situation and see what the right type of joint ownership structure is for them .

Joint tenants

1 Each owner has equal rights to the whole property .

1 If one owner dies , property ownership automatically goes to the surviving partner .

1 For the property to be sold , both owners must first agree to the sale and any proceeds from the sale are split equally .

1 Owners cannot pass on their share of the property in their will .

Tenants in common

1 Ownership doesn ’ t have to be split 50 / 50 , borrowers can own differing shares of the property .

1 Property ownership doesn ’ t automatically switch to the remaining owner if one joint owner dies .

1 Once both owners agree to sell the property , the proceeds are split depending on the number of shares each owner has .

1 Joint owners can pass on ownership of the property in their will .

Limited company ownership

A limited company structure could be a preferential route for investors , especially if they ’ re looking to purchase multiple properties .

Although it can seem like more hassle , increased costs and administrative work that comes along with a limited company structure could have less of an impact when your client has more properties in their portfolio . It ’ s worth asking your clients about their long-term buy-to-let plans .

So why should landlords consider running their buy-to-let business as a limited company ?

1 The reduction in mortgage interest tax relief doesn ’ t affect limited company landlords . It means those choosing to incorporate can offset all of their mortgage interest against profits from their rental income .

1 Companies are subject to Corporation Tax depending on the level of their profits . The main rate is 25 % where profits exceed £ 250,000 . Where profits are below £ 50,000 , the rate is 19 %. For companies whose profits fall between these two limits , they ’ ll pay Corporation Tax at the main rate , as reduced by marginal relief .

1 Limited company applications are stress tested at an ICR from 125 % which is lower than the 145 % ICR many lenders apply to individual landlord applications .

Landlords deciding on personal or joint ownership who ’ re considering a potential transfer of their ownership to a limited company in future , should be made aware of what they ’ ll need to budget for . Legally the transfer could be seen as a type of sale and purchase structure , which means more costs for your client as they may be liable for Stamp Duty , Capital Gains Tax and Early Repayment Charges .

How InterBay could help

Whichever structure your client chooses , InterBay is ideally placed to help them find the right buy-to-let mortgage . Our range can support a variety of property types , including converted and purpose-built houses in multiple occupation ( HMOs ) and multi-unit freehold blocks ( MUFBs ). Our buy-to-let mortgages are available to :

1 Individuals ( UK and EU nationals residing in the UK )

1 Limited liability partnerships ( LLPs ) 1 Limited companies ( UK incorporated ).

To find out more about how we could help , speak with a member of our sales team , visit www . interbay . co . uk or call our team on 0345 878 7000 .

For intermediaries only .

Source : 1 . Zoopla : Rental market report : What ’ s happening to rents ?

Note : Information correct as at 26 / 07 / 2023