Landlords investing via limited companies on rise

Landlords investing via limited companies on rise
Moubin Faizullah Khan, chief executive at GetGround - a company helping landlords set up limited companies

A growing number of buy-to-let investors are purchasing their properties through limited company structures following the introduction of tax incentives designed to boost the practice.

Venture capital-backed startup GetGround, which charges landlords a fee to set up a limited company on their behalf, is averaging 350 property transactions a month through incorporations, up 150 per cent from 140 per month the previous year. 

Since it launched in January 2020, GetGround has also grown its partnership network to 1,300 mortgage broker firms, investment advisers, lenders, letting managers, agents, and conveyancers.

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The startup told FTAdviser the breadth of partners proves all landlords - from first-time buyers all the way up to seasoned professionals - are now considering, or have already taken, the limited company route.

One incentive to buy through a limited company is that a property rental business does not have to pay a 15 per cent stamp duty land tax on residential properties costing more than £500,000.

It is just one of the ways the government is trying to professionalise a sector and encourage landlords to treat buy-to-let as a business.

GetGround’s chief executive, Moubin Faizullah Khan, said other incentives include being able to buy with business partners, change ownership in the future, and get access to more mortgage options.

His firm charges landlords up to a £149 one-time fee, and then £19 per month to run the company. This covers company formation, help with tax returns, the legal structure of shareholder agreements, and a business account.

GetGround estimates it accounts for some 10 per cent of monthly property purchases made through corporations.

Khan said the universally-felt financial uncertainty is putting pressure on the viability of many landlords’ investments.

“Just as we’re seeing an uptick in interest from investors looking to purchase energy-efficient, new build properties, they are also turning to limited company structures to optimise their finances,” he said.

“From tax efficiencies to personal liability, there are many good reasons why limited company investing makes good business sense, but ultimately it comes down to efficiency.

“Efficiency is key to investing sustainably, responsibly and profitably. In tougher economic times, the ability for landlords to optimise their buy-to-let portfolios for the long-term is proving crucial.”

Some in the industry are concerned ‘red tape’ may drive responsible buy-to-let landlords out of the housing market.

The buy-to-let market has undergone significant change since 2016 with the enforcement of stamp duty surcharges and mortgage tax relief withdrawals complicating the business for landlords and whittling down their profits.

There has been pushback by the industry’s trade body. This week, the Levelling Up, Housing & Communities select committee launched public evidence sessions for its inquiry into a 'Fairer Private Rental Sector'.

In response, the National Residential Landlords Association suggested the government should be looking at “simplifying the almost 170 laws already affecting the [buy-to-let] sector”.