Landlord News

Limited companies continue to grow in popularity for landlords

Em Morley - August 9, 2019

More than half of landlords plan to use limited companies to buy properties in the year ahead, according to new research from Precise Mortgages.

This information underlines the ongoing transformation of the buy-to-let market.

The study found 55% of landlords are willing to use limited companies for purchases. This is more than double the 24% of landlords who intend to buy as an individual.

It confirms that there is a continuing rapid growth in the number of landlords using limited companies to expand their portfolios. In Q4 of 2018 it was noted that 44% of landlords panned to use a limited company for purchases. In Q1 of 2019 this number was 53%.

Limited companies are apparently most popular amongst landlords with a portfolio of 11 or more properties, as 71% are using them for purchases, according to Precise Mortgages’ figures. However, it’s still the dominant option for those with portfolios of ten or fewer, with 51% saying they will go down the limited company route to buy their next property. This is compared with only 27% buying as individuals.

Almost seven in ten (69%) landlords intend to fund their next portfolio purchase with a traditional buy-to-let mortgage. This is compared with just over six in ten (62%) in Q4 2018, according to the research.

Precise Mortgages believes limited company status is more attractive to landlords, as the phased reduction in mortgage interest tax relief does not affect them. They can also offset mortgage interest against profits, which are subject to Corporation Tax of 19%, instead of income tax rates. Interest coverage ratios on limited company applications are also lower than they are for most individual landlord applications.

Alan Cleary, Managing Director of Precise Mortgages, said: “Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route particularly for those with larger portfolios.

“The increased use of limited company status is further evidence of how the buy-to-let market is changing and demonstrates how brokers and their clients need expert specialist support when buying as a limited company or considering switching.”