Landlords embrace limited company structures
Trend underscores a significant evolution in the buy-to-let market
IN RECENT YEARS, there has been a notable shift by landlords toward utilising company structures to manage their property portfolios. Paragon Bank has highlighted this trend, revealing a sharp increase in landlords incorporating their portfolios over the past four years. As of the second quarter of 2024, 81% of landlords using a limited company structure have incorporated their portfolios, a significant rise from 48% in the same quarter of 2020. This growing inclination towards incorporation is expected to persist, with two-thirds (67%) of landlords planning to purchase properties in the next 12 months opting to do so through a limited company. This is a marked increase from the 45% who intended to adopt this structure in 2020. Conversely, only 31% of landlords now plan to buy properties in their personal names, a decline from 36% four years ago.
EXPERIENCED LANDLORDS LEAD THE WAY More seasoned landlords are leading this trend, with the propensity to own properties through limited companies increasing alongside portfolio size. Among landlords with four or more buy-to-let (BTL) mortgaged properties, 37% have adopted this ownership mechanism, compared to just 15% of those with one to three BTL homes. This strategic shift is partly a response to the phased tax changes introduced in 2016, which have prompted landlords to seek more efficient ways to manage their investments in a challenging economic climate. The move towards incorporation is not just about tax efficiency; it also reflects a broader strategy among landlords to streamline their operations and adapt to an evolving market landscape. Despite the growing popularity of this approach, the research highlights that 78% of landlords still hold their properties solely in individual names, indicating room for further adoption.
DRIVEN BY THE NEED FOR GREATER EFFICIENCY AND RESILIENCE While incorporating properties into a limited company structure offers several potential benefits, it may only suit some landlords. Professional financial or tax advice ensures this strategy aligns with individual circumstances and goals. Nevertheless, the trend underscores a significant evolution in the buy-to-let market, driven by the need for greater efficiency and resilience amid ongoing economic challenges. As the landscape for property investment continues to evolve, it is essential to stay informed about the benefits and implications of incorporating your portfolio. If you’re considering this strategy or need further insights, consulting with industry experts can provide the guidance necessary to make well-informed decisions.