13th
Feb 2025
A study commissioned by a Banking group indicated that seven in ten landlords intending to buy a new buy-to-let property will be using a limited company structure.
In a survey of 789 landlords conducted in the fourth quarter of 2024, 69% expressed their intention to purchase through a limited company whilst 25% planned to buy in their personal name, and the rest were uncertain.
The survey conducted by Pegasus Insight revealed that the proportion of landlords opting for a limited company structure reached the second highest level on record, only exceeded by the 74% recorded in the second quarter of 2023.
Despite the growing trend of landlords switching to limited companies, 78% of landlords continued to hold properties in their personal names.
Approximately 9% of landlords owned all their properties through a limited company, with this figure rising to 28% for those owning four or more properties.
However 13% of landlords maintained a combination of personal and limited company holdings, averaging 74% of their properties under limited company structures.
Tax advantages and financial planning are the primary motivations for utilizing a limited company.
Almost half (45%) of landlords with properties held in a limited company highlighted personal income tax benefits as a significant perk, while 42% noted the advantage of mortgage interest relief.
Additionally, a third emphasised the benefits of corporation tax rates, and 27% mentioned inheritance tax planning.
Landlords without limited company properties cited the high costs of asset transfers as the main obstacle -52%-, followed by concerns over capital gains tax -32%- and the administrative complexities of operating a limited company -31%.
The head of mortgage sales at the bank, 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.”
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