Landlords are being advised not to dive in and switch to a limited company structure unless they have a larger portfolio of properties.

In purchasing a property through a limited company, higher mortgage costs for limited company borrowers effectively cancels out the benefit of side-stepping the recent changes to mortgage interest tax relief.

The changes to mortgage interest tax relief, which only impact individual landlords and not those who buy through a limited company, were introduced in April 2017 and will be phased over a number of years, giving landlords time to adapt.

According to new data from Private Finance, a landlord will only benefit from a limited company structure if he or she has at least four buy-to-let properties in their portfolio.

Director of Private Finance, Shaun Church, said: “Limited company mortgage products are available through a handful of smaller lenders, resulting in higher rates compared to personal borrowing.”

He commented: “Larger landlords might find the tax benefits associated with limited company ownership outweigh the higher cost of mortgage borrowing.”

However, he stressed that: “Each investor is different and there’s no one-size-fits-all solution.”

Landlords are being told to consult an independent tax specialist before making changes to their portfolio or moving to a limited company structure so that they know what’s best for their buy-to-let business.

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