Incorporation to be used by majority of acquisitive landlords

Published on

Seven out of 10 landlords who intend to buy a new buy-to-let property will use a limited company structure, according to new Paragon Bank research.

The survey of 789 landlords in the fourth quarter of 2024 found that of those intending to purchase a new rental property in the next 12 months, 69% plan to do so via a limited company.

A quarter will purchase in personal name, with the remainder unsure.

The proportion intending to purchase through a limited company was the second highest on record, previously only beaten by 74% recorded in the second quarter of 2023, according to the survey, conducted on behalf of Paragon by Pegasus Insight.

The majority of landlords (78%) still own property in a personal name.

9% own all properties within a limited company structure, although that rises to 28% where the landlord owns four or more properties

A further 13% hold a mix of personal name and limited company properties, although they are typically more heavily weighted towards incorporation, with an average of 74% of properties within these portfolios held within business structures.

Paragon said the primary drivers for holding property within a limited structure are tax benefits and financial planning. 45% of landlords with limited company property said the impact on personal income tax was a key benefit, with 42% citing mortgage interest relief. A third referenced corporation tax rates on profits, with 27% claiming inheritance tax planning as a benefit.

Those with no limited company property cited the costs of transferring assets into a corporate vehicle as the main barrier (52%), followed by capital gains tax uncertainty (32%) and the administration costs and effort of running a limited company (31%).

Jason Wilde, Paragon Bank head of mortgage sales, said: “The trend towards limited company structures has accelerated in more recent years, mainly due to changes to mortgage interest relief, but also landlords considering Inheritance Tax planning.

“Over 80% of our customers are now purchasing within a limited company structure. As many of them operate as SMEs, adopting a business structure makes sense and is more tax efficient.

“Limited companies also benefit from an interest cover ratio of typically 125%, versus 145% for higher-rate taxpayers buying in personal name, so it broadens the availability of buy-to-let mortgage finance.”

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

South drives first annual asking house price fall since 2024

Asking prices for homes in Great Britain have slipped into annual decline for the...

Rents fall as inflationary pressures mount

Tenants are beginning to feel some respite as rents across Great Britain fall at...

Bank of England set to hold rates as inflation proves sticky

The Bank of England is expected to hold interest rates at 4% this week...

Mortgage pros stride for mental health on Thames Bridges Trek

Mortgage industry pros from Crystal Specialist Finance, Market Financial Solutions, United Trust Bank, Movin...

UK house price growth downgraded amid pre-Budget nerves

The UK housing market is expected to see slower price growth this year and...

Latest publication

Other news

South drives first annual asking house price fall since 2024

Asking prices for homes in Great Britain have slipped into annual decline for the...

Rents fall as inflationary pressures mount

Tenants are beginning to feel some respite as rents across Great Britain fall at...

Bank of England set to hold rates as inflation proves sticky

The Bank of England is expected to hold interest rates at 4% this week...