'Some say buy-to-let is dead - but my £33m portfolio is just the start'


Paul Rothewell, Director of Empire Property

While many buy-to-let landlords are in despair over a new tax due to be introduced in less than three months, large landlords see it as an opportunity – and some are even expanding to take advantage.

Experts predict that as the tax changes come into force, the buy-to-let market may involve fewer small “accidental landlords”, who are more likely to be put off by the changes, and more professional landlords who will be able to capitalise by buying properties sold off by individuals.

Professional landlords are in a better position than their smaller counterparts because many of them own their properties via limited companies, or can afford to set up a company quickly.

They are also eligible for some tax reliefs that amateur landlords cannot use. However, they are currently very much in the minority. A survey last year by Shelter, the housing charity, found that 92pc of landlords let fewer than five properties and just 4pc described it as their full-time job. Only 12pc were registered as a business.

This is changing, though. According to Mortgages for Business, a broker, 69pc of new buy-to-let purchases made in the final quarter of last year were made by landlords with limited companies.

Income from properties held by limited companies is not affected by the tax changes being introduced on April 6 and is also taxed at just 20pc – a rate that will fall to 17pc by April 2020.

Meanwhile, landlords who own properties in their own names and pay the higher rate of tax (40pc) will lose the ability to deduct their mortgage costs from their rental income before calculating their tax bill.

However, moving properties into a limited company can be expensive. Owners must pay stamp duty – via the company – when the property is transferred. There is also a capital-gains tax charge if the property has gained in value, although this can be mitigated by professional landlords if they can prove that the portfolio amounts to a “business” as opposed to an “investment”. They must also tell their mortgage lender that the ownership of the property is changing and switch their mortgage to a commercial one – another potentially costly move. But these costs are not putting off large landlords, who have the cash to set up a company and the time – and sometimes the staff – to organise it. Many of them are also diversifying into commercial and mixed-use property.

Paul Rothwell, 34, has built up a £33m property fortune after starting with just £15,000 13 years ago.

His company, Empire Property Concepts, based in Doncaster, now employs 12 staff. The business started when his father gave him money to buy a property in Nottingham, when he was a 21-year-old student reading economics and financial services. He converted the basement into a bedroom and let the other rooms out to fellow students. His timing was good: between 2004 and 2007 property prices rose by 26pc over the UK as a whole and by 16pc in the East Midlands. As a result, three years later, when he came to graduate, he realised that the house had leapt in value from £88,000 to £140,000.