Nearly two thirds of landlords expect to buy future buy-to-let properties through limited company structures, according to new research from Paragon Bank.
Research carried out for Paragon’s report, How limited company ownership is becoming the new normal, suggests the long-term shift towards holding buy-to-let property in limited companies is set to continue, driven largely by younger and newer landlords.
A survey of more than 500 landlords found that 63% expect to make future property purchases through specialist purchase vehicles. While this figure represents an average across all age groups, Paragon’s analysis shows a clear generational divide, with appetite for limited company ownership strongest among younger landlords and tapering off with age.
Every respondent aged 25 to 34 said they plan to use limited companies for future acquisitions. This compares with eight in 10 landlords aged 35 to 44, almost three quarters of those aged 45 to 54, and around half of landlords in the older age brackets.
Among those aged 55 to 64, 54% intend to buy through an SPV, falling to 48% for landlords aged 65 to 75.
The research also indicates that the use of limited companies is not confined to new purchases. Almost a third of landlords surveyed, 32%, said they intend to transfer properties currently held in their personal name into a limited company structure in the future.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “Our research shows how owning property via a limited company structure has become increasingly popular over the past decade, driven by changes in taxation.
“Nearly two thirds of landlords intend to make future purchases through limited companies, so we expect the overall proportion of property held within a company structure to increase steadily in the coming years, particularly when you include those landlords who will incorporate existing property from personal name.”
She added: “It’s encouraging to see that they will continue to adapt in this way, particularly the next generation of landlords who seem to have realised the potential benefits of this ownership structure early in their lettings business careers.”
Paragon’s report highlights how the proportion of landlords using limited companies has risen steadily over the past decade. A key driver behind this trend is widely seen as the removal of Section 24, announced in 2015, which restricted landlords’ ability to deduct finance costs such as mortgage interest before paying tax on rental income.
