Tax changes push landlords towards incorporation of BTL portfolios
Nearly two thirds of landlords expect to use limited company structures for future buy-to-let acquisitions, according to new research from Paragon Bank.
The study, conducted for Paragon’s report on how limited company ownership is becoming more prevalent in the buy-to-let market, indicates that the growth in properties held via special purpose vehicles (SPVs) over the past decade is set to continue. The trend is most pronounced among younger and more recently established landlords.
In a survey of more than 500 landlords, 63% said they planned to make future purchases through SPVs. The figure represents an average across age groups, but Paragon’s analysis shows a clear pattern: the younger the landlord, the more likely they are to favour a company structure.
All respondents aged 25 to 34 said they intended to buy future properties through a limited company. Among those aged 35 to 44, 82% planned to do so, while 73% of landlords aged 45 to 54 reported the same intention. The proportion drops among older cohorts, with 54% of those aged 55 to 64 and 48% of landlords aged 65 to 75 expecting to use SPVs for future buy-to-let purchases.
The research also found that almost a third of landlords (32%) intend to transfer at least some properties held in their own name into a limited company in the future, signalling ongoing incorporation activity in the sector.
“Our research shows how owning property via a limited company structure has become increasingly popular over the past decade, driven by changes in taxation,” said Louisa Sedgwick (pictured right), managing director of mortgages at Paragon Bank.
“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.”
“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.”
The use of limited companies among landlords has risen steadily over the last 10 years. One key factor highlighted is the restriction of mortgage interest relief under Section 24, announced in 2015, which removed the ability of individual landlords to deduct costs such as mortgage interest before paying tax on rental income.
For mortgage professionals, this trend points to continued demand for limited company buy-to-let products, as well as ongoing remortgage and refinancing opportunities as landlords restructure existing portfolios into SPVs.
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