Seven out of 10 landlords planning to buy a new rental property during the next 12 months will use a limited company structure, it has been claimed.

Paragon Bank’s poll covering he fourth quarter of 2024 found that 69% planned to purchase through a limited company - the second highest on record, only beaten by 74% recorded in the second quarter of 2023. Just a quarter of landlords aimed to purchase in personal name.

Despite the growth of incorporation over the past decade, most landlords - 78% - still own property in their own name, while 9% own all their properties within a limited company structure, rising to 28% when they own four or more properties.

A further 13% hold a mixture of personal name and limited company properties, although they are typically more heavily weighted towards incorporation, reports Paragon, with an average of 74% of properties within these portfolios held in business structures.

Key benefit

Nearly half of landlords with limited company property - 45% - named the impact on personal income tax as a key benefit, with 42% citing mortgage interest relief. A third referenced corporation tax rates on profits, with 27% claiming inheritance tax planning as a benefit.

Those with no limited company property cited the costs of transferring assets into a corporate vehicle as the main barrier (52%), followed by capital gains tax uncertainty (32%) and the administration costs and effort of running a limited company (31%).

Jason Wilde (pictured), head of mortgage sales, reports that more than 80% of Paragon’s customers are now buying within a limited company structure. “As many of them operate as SMEs, adopting a business structure makes sense and is more tax efficient,” he adds.

“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.”