Landlords who use limited company structures are incorporating a much larger proportion of their portfolios to mitigate the impact of tax changes.

Paragon Bank’s research reveals that 81% of the portfolio of the average landlord who utilises a limited company structure was incorporated in the second quarter of this year – up from 48% in Q2 2020.

This trend is set to continue, as 67% of those landlords who plan to buy in the next 12 months say they’ll do so through a limited company, a big rise on the second quarter of 2020 when it stood at 45%. In contrast, only 31% plan to buy in a personal name, falling from 36% during the same period.  

Increases

The propensity to own properties through limited companies increases with portfolio size, reports Paragon, which found this ownership mechanism is adopted by 37% of landlords who have four or more buy-to-let mortgaged properties, compared to 15% with between one and three buy-to-let homes.

Louisa Sedgwick, managing director for mortgages at Paragon Bank, says the number of landlords using limited companies has accelerated in recent years as more look for ways to run their business more efficiently amidst a challenging economic environment.  

Advice

“While incorporation isn’t necessarily the best option in every situation, and landlords should seek advice from a professional financial or tax adviser, this highlights the opportunity for those that place this type of business,” she adds.

OSB Group reported earlier this year that 65% of landlords were considering or have already become a limited company, while Hamptons found that a record 50,004 limited buy-to-let companies were set up last year.

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