If we were in any doubt that Government policy can shift the dial considerably when it comes to the UK’s housing and property markets, then we need only look at what has happened within the buy-to-let sector, since the mid-2010s.
Of course, landlords had been in the political and regulatory crosshairs prior to that, but we saw some sizeable shifts from various Conservative Governments throughout that decade which has resulted in a real sea change.
No-one should be shocked, for instance, by the recent data set out of Hamptons which revealed there are now 400,000 individual companies set up to hold rental property.
After all, given the cutting of mortgage interest tax relief for those holding properties as individuals, it was always likely to be the case that landlords would move towards corporate structures, particularly when it came to any new purchases.
Indeed, go back to the introduction of those rules – as Hamptons’ research reveals – and we were looking at limited company buy-to-let as a much more niche area of the market, with just 92,975 limited companies holding landlord properties.
It means that, not only we have seen a 332% rise in the number of companies specifically set up to hold buy-to-let properties, but limited company buy-to-let has moved from a niche to the mainstream of property investment.
Where once we would have had higher-priced products for limited company landlords, with a whole different degree of criteria and underwriting associated with them, now standard and limited company buy-to-let tend not to differ too much at all, certainly not in terms of price.
Indeed, lenders like ourselves, offer a tailored limited company buy-to-let offering because we know the vast majority of our landlord borrowers at least hold some of their portfolio in these vehicles.
Lenders understand this is the method of property portfolio holding of choice for most landlords, and were it not for the vastly inflated level of Stamp Duty they need to pay in order to move from individual to limited company, we would have seen an even greater shift to corporate buy-to-let.
Indeed, for some landlord borrowers, particularly those who intend to hold properties for the long-term – 15, 20, or 25 years – added up over time, it might still be worth them moving individually-owned buy to let properties to their limited companies.
That being determined by whether the tax saving over that length of time perhaps ‘pays for’ the cost of the extra Stamp Duty.
Advisers might well spy an opportunity here. While you are clearly not tax advisers, and neither should you ever stray into this area, there is the opportunity to set existing landlord clients a series of questions that may well help them determine whether it’s worth their while to ‘sell’ some, or indeed all, of their existing properties held as individuals into their limited company.
Of course, the ability to do that has been made even more expensive recently because the Labour Government increased the stamp duty surcharge from 3% to 5% for landlords, and that has effectively put an end to many hopes for such a move.
But, it is definitely worth the client running the numbers, particularly if they do have a significantly longer time horizon they intend to hold the properties for.
Still, what we can say is that limited company buy-to-let undoubtedly dominates the purchase market for new buy to let properties, and there is no hint this is going to change any time soon.
Again, according to that Hamptons’ research, 70,000 to 100,000 buy to let properties are added into limited companies each and every year, and as mentioned, while some of these will be moving from the individual’s name, much of these will be new purchases.
In 2024, for example, 61,517 new limited companies alone were set up, which in turn was 23% up on the previous year.
As lenders active in this space, plus of course advisers working with landlord borrowers, we need to be on top of the demand this generates, the opportunities it presents, and the type of advice, products and criteria limited company landlords are going to be demanding as a result.
For us, that means more generous ICRs’ on specialist properties such as houses in multiple occupation (HMOs) and short-term lets, it means accepting those newly-incorporated limited companies that are increasingly being set up, it means no credit search for shareholders with less than a 20% shareholding, the opportunity for an early remortgage, no limit to portfolio sizes, intercompany loans acceptable as deposits, and loans up to £2m where the product allows.
Overall, there’s no doubting that limited company buy-to-let is going to remain a huge part of the sector, and therefore advisers must be on top of the ways and means by which clients want to secure the finance they need, plus how lenders like Foundation increasingly tailor our offering to this market space.
It is certainly going to pay to be the adviser of choice for limited company landlords throughout 2025 and beyond.
Grant Hendry is director of sales at Foundation Home Loans
