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Limited Company Ownership in the Buy-to-Let Market

Tax benefits drive landlords toward corporate structures ...


Posted by Helen Beaumont on 13/09/2023 @ 8:00AM

In recent times, the property rental landscape has seen a monumental shift as more landlords lean towards limited company structures ...

It remains to be seen how this evolution will further reshape the buy-to-let domain!

It remains to be seen how this evolution will further reshape the buy-to-let domain!

copyright: andreypopov / 123rf

This transformation is fueled primarily by tax incentives and the mounting costs associated with maintaining a rental portfolio, especially in light of rising interest rates.

Recent research commissioned by buy-to-let mogul, Paragon Bank, paints a vivid picture: a whopping 74% of landlords eyeing a new buy-to-let property in the coming year plan to use a limited company for the purchase. This represents a significant increase from the 62% recorded in the initial quarter of 2023.

In contrast, the number of landlords planning to make property purchases in their individual names has dwindled from 41% in the last quarter of 2021 to a mere 17% in the second quarter of this year.

So, what's the appeal behind the corporate structure?

  • Taxation Temptations

    For starters, there are some undeniable tax perks to using a limited company. Crucially, these companies can offset mortgage interest against their company income. This means they are liable for corporation tax rates and not personal income tax rates. For those raking in profits under £50,000, they're looking at a 19% corporation tax, while those surpassing that threshold are subject to tax of up to 25%.

  • Mortgage Maneuvers

    When it comes to securing a mortgage, limited company landlords seem to have the upper hand. The majority of lending institutions require a 145% interest coverage ratio from individual higher-rate taxpayers. However, for limited companies, this ratio drops to 125%. This gives them an edge in securing higher loan amounts, nudging more landlords to gravitate towards this avenue.

    Holding rental property within a limited company structure has been gaining traction since the mortgage interest relief alterations by the government in 2017. However, the past year has seen a noticeable acceleration, especially with climbing interest rates and subsequent shifts in mortgage pricing.

  • Bigger Portfolios, Bigger Players

    An intriguing revelation from the Paragon Bank study is the growth in portfolio sizes of landlords who own at least one property through a limited company. The average size of such portfolios has risen to 16.9 in this year's second quarter, up from 15.6 in Q1 and 13.1 in late 2021. This progression suggests that portfolio landlords continue to be active players in the property purchasing arena.

    Furthermore, the average count of properties within these limited company portfolios has surged from 7.8 at the end of 2021 to 12.3 in the recent quarter, emphasizing the growing trust and reliance on the corporate structure.

With almost 1,000 landlords participating in this enlightening research by BVA BDRC for Paragon Bank, it's evident that the rental property market is undergoing a structural metamorphosis.

As tax benefits and mortgage advantages continue to woo landlords, it remains to be seen how this evolution will further reshape the buy-to-let domain.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about the tax benefits of buy-to-let with a limited company, it may be a great idea to give me a call on 01908 774323 and let's see how I can help.

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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.