BTL landlords are transitioning to a limited company structure for their investments.
Research shows that 70% of landlords planning to grow their portfolios this year intend to acquire new buy-to-let properties through a limited company.
A survey conducted for Paragon Bank found that 69% of these landlords will choose this approach, the second-highest figure ever recorded. Only 25% of landlords plan to purchase properties in their personal name, with the rest still undecided.
Rising Trend of Limited Company Structures Jason Wilde, Paragon’s head of mortgage sales, stated that the shift towards limited company structures has accelerated in recent years, primarily due to changes in mortgage interest relief and landlords considering Inheritance Tax planning.
“Over 80% of our customers are now purchasing through limited companies. Since many operate as small businesses, this structure is more tax-efficient,” he explained.
He added, “Limited companies also have an interest cover ratio of about 125%, compared to 145% for higher-rate taxpayers purchasing in their personal name, which broadens access to buy-to-let mortgage financing.”
Majority Still Own Properties in Personal Name While incorporation is on the rise, most landlords (78%) continue to hold properties in their personal name.
However, 9% of landlords own all their properties through a limited company, rising to 28% for those with four or more rentals. An additional 13% use a hybrid approach, typically leaning towards incorporation.
Tax and Financial Planning Motivations Tax benefits and financial planning are the main reasons for landlords choosing limited company structures. For 45% of these landlords, personal income tax benefits are essential, while 42% mention mortgage interest relief.
Corporation tax rates impact 33%, and 27% cite inheritance tax planning as a key factor.
For those without limited company properties, reasons such as transfer costs (52%), capital gains tax concerns (32%), and administrative burdens (31%) are often highlighted.
