The limited company structure is being increasingly targeted by landlords, with seven out of ten planning to use this when purchasing a new BTL property.
Commissioned by Paragon Bank, Pegasus Insights surveyed 789 landlords in Q4 2024 to gauge industry attitudes to limited company use.
Of this sample, 69% were planning to use limited companies when buying new BTL properties. A quarter responded they would buy this in their personal name, with the rest unsure.
This was the proportion of landlords intending to use limited companies to purchase properties was the second highest on record.
The survey found only 9% of landlords owned all their properties within a limited company structure though this rose to 28% for those with four or more properties.
A further 13% held a mix of personal name and limited company properties, with an average of 74% of properties held within business structures.
When asked, the tax benefits and financial planning advantages of a limited company were seen as the biggest drivers behind this trend.
Nearly half of landlords with limited company property (45%) said the impact on personal income tax was a key benefit, with 42% citing mortgage interest relief. In addition, 27% claimed inheritance tax planning was a key benefit.
Insights were also sought as to why some landlords had yet to use the limited company structure.
Over half (52%) cited the costs of transferring assets into a limited company as the main borrower, with 32% picking capital gains tax uncertainty.
“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,” said Jason Wilde, head or mortgage sales at Paragon Bank (pictured above).
“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 BTL mortgage finance.”
