Landlords switch to companies for new buy-to-let purchases

Landlords switch to companies for new buy-to-let purchases

Nearly two out of five (38 per cent) landlords will use limited companies to buy properties over the next year compared with 28 per cent as individuals, according to Precise Mortgages.

A poll conducted online between 9 and 20 March among a sample of 1,043 National Landlords Association members showed among landlords with more than four properties the percentage buying new property via a limited company increases to 42 per cent while among those with up to three properties it drops to 31 per cent.

Landlords operating in London are the most likely to be planning to purchase through a limited company and the findings underline the continued growth in popularity of limited companies among landlords, according to Alan Cleary, managing director of Precise Mortgages.

Mr Cleary said: “Buying property within a limited company structure has become increasingly popular, particularly among larger professional landlords. Given the predicted rise in landlords switching to limited company status this year, we can expect this trend to continue."

According to the research by Precise Mortgages, 89 per cent of brokers expect the number of landlords setting themselves up as a limited company to increase with the ability to continue to claim tax relief on mortgage interest seen as the main motivation.

The research also found landlords with larger portfolios are significantly more aware of the Prudential Regulation Authority (PRA)’s lending criteria and portfolio application process changes.

In fact, 45 per cent of all landlords are aware of PRA changes but that increases to 67 per cent among landlords with four or more buy-to-let (BTL) mortgages.

Daniel Bailey, principal at Derbyshire-based Middleton Finance, said: “I am seeing an increase in buy-to-let applications through limited companies.

"If a client is looking to buy more than three or four properties the majority of clients are purchasing property though a limited company.

“It is important to get tax advice from a tax expert as each client’s circumstances are different. Limited companies offer a lot more flexibility and are proving to be popular with landlords who are looking to start or increase their portfolio.

"There are a number of advantages to doing this, it is important if you are looking to invest in property to work with a mortgage broker and a property tax expert.”