Research carried out on behalf of Paragon Bank revealed that seven out of 10 landlords planning to buy a new buy-to-let (BTL) property will use a limited company structure.
The survey of 789 landlords in Q4 2024 found that 69% intended to purchase through a limited company.
A quarter planned to do so in their personal name, and the remaining landlords were unsure.
The survey, conducted by Pegasus Insight, indicated that the percentage of landlords opting for a limited company structure was the second highest on record, previously only surpassed by 74% in Q2 2023.
Despite the trend towards incorporation, 78% of landlords still owned property in their personal name.
Around 9% owned all their properties through a limited company, up to 28% for landlords with four or more properties.
Additionally, 13% held a mix of personal and limited company properties, with an average of 74% of their properties in limited company structures.
The main reasons for using a limited company are tax benefits and financial planning.
Nearly half of landlords with limited company properties (45%) cited the impact on personal income tax as a key benefit, while 42% mentioned mortgage interest relief.
A third pointed to corporation tax rates, and 27% referred to inheritance tax planning.
Those without limited company properties identified the costs of transferring assets as the main barrier (52%), followed by uncertainty over capital gains tax (32%) and the administrative burden of running a limited company (31%).
Jason Wilde (pictured), head of mortgage sales at Paragon Bank, said: “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.
“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 buy-to-let mortgage finance.”
