In 2024, a record-breaking 46,449 buy-to-let companies were registered in England and Wales, marking a significant 23% increase from the previous year, according to analysis by Hamptons* using Companies House data. This sharp rise is driven primarily by tax advantages that limited companies offer, particularly for higher-rate taxpayers.
Landlords are increasingly turning to this structure to mitigate the impact of recent tax changes that have made property investment less lucrative through personal ownership.
Why Are Landlords Switching to Limited Companies?
The primary motivation for landlords setting up limited companies is the tax efficiency it provides. Under current tax rules, landlords who hold properties in their own names can no longer deduct mortgage interest costs from rental income before calculating their tax bill. This change, introduced in stages from 2017, has pushed many landlords into higher tax brackets, significantly reducing their rental profits.
Limited company structures, however, allow landlords to offset mortgage interest against rental income, resulting in a lower corporation tax bill. Currently, corporation tax is set at 25%, whereas higher-rate taxpayers can be taxed up to 45% on their rental income. This considerable difference makes limited companies an attractive option for landlords looking to maximise their profits.
Key Benefits of Limited Company Structures for Landlords:
- Mortgage Interest Deductions: Unlike individual landlords, companies can still offset mortgage interest costs before tax.
- Lower Corporation Tax: The corporation tax rate is significantly lower than the higher rate of income tax, making it a more profitable option for landlords with large portfolios.
- Inheritance Tax Planning: Holding properties in a limited company can also provide more flexibility for inheritance tax planning, allowing property assets to be passed down more efficiently.
- Dividend Payments: Landlords can pay themselves through dividends, which can be more tax-efficient than receiving rental income as personal income.
Aneisha Beveridge, head of research at Hamptons, highlighted this trend, stating: “While landlord purchase numbers are well down on pre-pandemic levels, there’s been no sign of a slowdown in the number of companies being set up.”
Indeed, around 70% of new buy-to-let purchases in 2024 have been made through limited companies, and projections suggest that by year-end, the total number of buy-to-let companies will exceed 62,000.
The Financial Outlook for Landlords
Despite the tax advantages, it’s important to remember that setting up a limited company also comes with additional costs and responsibilities. Company administration, annual filings, and compliance with corporation tax laws can be more complex than holding properties personally. Furthermore, accessing mortgage finance through a company can sometimes attract higher interest rates than individual buy-to-let mortgages.
However, for landlords with larger portfolios or those in the higher-rate tax bracket, the long-term financial benefits often outweigh these additional costs.
How Beavis Morgan Can Help
At Beavis Morgan, we specialise in helping landlords structure their property investments in the most tax-efficient way possible. If you are considering switching to a limited company or want to explore the benefits, our team of tax experts can provide tailored advice to suit your circumstances.
- Tax Planning: We can help you assess the tax implications of holding property in a limited company versus individual ownership.
- Company Formation: Our team can guide you through the process of setting up a buy-to-let limited company, ensuring compliance with all legal and tax requirements.
- Ongoing Advice: We provide ongoing support to manage your company’s tax obligations and make the most of available reliefs and allowances.
- Property Reviews, Refinancing and Mortgage Assistance: Provided together with our partner company, Moorfields Advisory.
With more landlords than ever making the switch to limited companies, now is the time to review your property investment strategy. Contact your usual Beavis Morgan partner or email info@beavismorgan.com to discuss how we can help you maximise your profits and protect your assets.
