23% more landlords move to Ltd company status as tax increases bite

Official data reveals surge in applications by landlords to incorporate their businesses as mortgage interest relief tapers off.

winkworth landlords

More and more landlords are turning to limited company status to avoid the increasingly punitive taxes levied as the government’s Section 24 tax changes kick in.

So says property investment firm Thirlmere Deacon whose research among official statistics shows 41,700 buy-to-let incorporations in 2020, an increase of 23% on 2019, taking the total number of buy-to-let firms to 228,743.

These numbers have more than doubled since 2016 when tax changes for landlords first began to bite.

Between 2016 and 2020, more companies were set up to hold buy-to-let properties than in the previous 50 years combined.

More than a third of all companies set up to hold buy-to-let properties in 2020 were in London; together, London and the South East accounted for almost half (47%) of all incorporations.

Firms set up to hold buy-to-let properties were the second most common founded during 2020, after companies selling goods on-line and by mail order.

Landlords holding property in a limited company have the ability to offset 100% of mortgage interest against profits, while those holding a property in their own name can offset just 20.

Landlords can grow their portfolio more quickly using a company, as there is no income tax on the retained profit, allowing more cash to re-invest. And corporation tax is payable on trading profits at a lower rate than the higher income tax rate.

thirlmere deacson williamsThirlmere Deacon CEO Stuart Williams (pictured) says: “Running a portfolio through a limited company is not right for everyone. But one of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket.”


One Comment

  1. Ltd company = limited liability. This ultimately means less protection for tenants. This Government is so behind the curve it just doesn’t bear thinking about … stupid is as stupid does.

    looking ahead, it’s a safe bet for property companies to be treated differently to trading companies in the future for tax, finance and regulation, it’s just a case of when not if, in MHO.

    Article states “as there is no income tax on the retained profit” …that applies to all, not just ltd companies, if you’ve paid your tax on what’s come in after expenses and put the left over in the bank it’s not subject to tax either, so this bit I didn’t follow?

    Lastly, funding a mortgage in a ltd company is approx. 50% more expensive at the moment so whilst you can a lower rate of tax on profits, you are going to have lower profits to start with.

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