Limited companies dominate BTL market

Limited companies are now making up a significant majority – 70% – of all buy-to-let purchases in England and Wales, according to estate agency Hamptons.    

Currently, limited companies own 666,831 privately rented homes in England and Wales, according to Hamptons – about 13% of the government’s estimated total of around 5.1 million. With companies making such a large proportion of purchases, and record numbers of landlords quitting, that share is likely to increase quickly. Between January and September 2024, 46,449 limited companies were set up to hold BTL properties, 23% more than in the same period last year.

It isn’t just landlords with large portfolios setting up limited company structures: 54% of BTL properties bought this year went to a limited company making its first, second or third purchase.  

Why are landlords setting up so many limited companies in 2024?

One big advantage for limited company landlords is that they can deduct mortgage interest payments from their company’s taxable income in full. Landlords who own their BTL properties personally only get a 20% tax credit on mortgage interest payments, so they aren’t fully tax deductible for higher rate income taxpayers.

Limited companies will also pay 25% corporation tax on rental profits, whereas a higher-earning landlord could pay 40% or 50% income tax. However, landlords will have to pay tax on any salary they take from their limited company, so some of those tax savings may be lost.

According to Hamptons, rumours of increases to Capital Gains Tax or Inheritance Tax in this year’s Budget were also pushing more landlords to incorporate. But CGT was left untouched, while the increase to stamp duty on investment properties will affect individual and limited company landlords alike. The government’s planned reductions to business property relief could also increase the Inheritance Tax burden on limited company landlords.

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