Following a Budget that continues to generate headlines and spark debate across numerous sectors of the market, individuals, families, and businesses throughout the UK are carefully assessing its impact on their current and future financial plans.
For landlords, further evaluation of their portfolios, and individual properties within these portfolios, is nothing new.
In recent years, tax and regulatory changes in the UK have significantly impacted the buy-to-let market, favouring professional landlords with extensive portfolios and long-term investment strategies. Professional landlords often have the financial resilience and strategic foresight to navigate these changes, leveraging economies of scale and diversified portfolios to maintain profitability. In contrast, accidental landlords, who may rely on rental income as a supplementary source, find it more challenging to absorb increased costs and tax liabilities, leading some to exit the market.
the formation of limited companies in which to house various property types continues at a considerable pace
A significant part of this ongoing strategy involves how landlords fund, manage and control their assets and, despite a decrease in the number of purchases compared to pre-pandemic levels, the formation of limited companies in which to house various property types continues at a considerable pace.
LATEST DATA
Recent analysis of Companies House data from Hamptons shows that in September 2024 alone, 5,312 new limited companies were set up across Great Britain to hold buy-to-let properties. The data indicates that this figure is 28% higher than in September 2023 and represents the third-highest monthly figure on record, trailing only April 2024, with 5,854 new companies, and February 2024, with 5,442.
The surge in incorporations is suggested to have set a record for the first three quarters of 2024, with 46,449 companies formed between January and September, marking a 23% increase over the same period when compared to 2023 data, an already record-breaking year for incorporations. This means that the current year to date has seen more companies established than throughout all of 2021.
This shift is also evident in the latest Pegasus Insight Landlord Trends research report for Q3 2024 which outlines that the share of rental properties held within company structures has jumped from 36% in Q1 2020 to 76% in Q3 2024.
BENEFITS OF INCORPORATION
Incorporation offers key benefits for landlords aiming to expand and manage larger portfolios. Currently, a significant proportion of newly purchased rental properties by limited company landlords are placed directly into business structures. This shift highlights a growing preference for the flexibility and tax efficiency of limited companies, particularly appealing to landlords with substantial portfolios. The Landlord Trends research also shows that while most landlords (79%) still hold all their properties individually, 21% now hold at least one property within a limited company structure, with 9% managing their entire portfolio this way. These landlords, who typically own an average of 13.1 properties, tend to be more leveraged and investment oriented.
The significant rise in limited company formations highlights the resilience emerging across the buy-to-let sector. As the market increasingly shifts toward corporate structures, intermediaries remain best positioned to guide individual landlord clients through the advantages and considerations of this approach.
By connecting clients with specialist lenders and offering in-depth advice on limited company funding, intermediaries can enhance client relationships, tap into a growing market segment, and adapt to the evolving demands of the buy-to-let industry. This approach not only supports landlords in futureproofing their investments but also helps them capitalise on opportunities within the increasingly complex but opportunity-laden UK housing market.
