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Record high proportion of landlords intend to buy within Limited Company structure

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  • Three-quarters of landlords who intend to purchase a new rental property in the next year will utilise a Limited Company structure
  • Proportion has increased since Q4 2021 and up from 62% recorded in Q1 2023
  • Average portfolio size for those with at least one Limited Company property increases to 16.9

Three-quarters of landlords who intend to purchase a new rental property in the next year will utilise a Limited Company structure - a record level - research carried out for buy-to-let specialist Paragon Bank has revealed.

Paragon Bank research of nearly 1,000 landlords, carried out by BVA BDRC, showed that 74% of landlords who intend to purchase buy-to-let property in the next 12 months will do so via a Limited Company.

This was the highest level recorded on BVA’s tracker survey and up from 62% of landlords who stated they would use a Limited Company during the first quarter.

Conversely, those who plan to buy in an individual name have fallen from 41% recorded in the final quarter of 2021 to 17% in the second quarter of this year.

Buying via a Limited Company structure offers a number of tax benefits. Limited Companies can deduct mortgage interest from company income and pay tax at Corporation Tax rates, rather than an individual landlord’s personal income tax rate.

Limited Company ownership can also offer more favourable mortgage financing options. Most lenders set interest coverage ratios at 145% for higher-rate taxpayers, whereas Limited Company applications require a ratio of 125%. Additionally, Limited Company landlords can typically secure higher loan amounts, further driving the adoption of this approach.

Louisa Sedgwick, Paragon Bank Commercial Director of Mortgages, said: “Holding rental property within a Limited Company structure has been growing in popularity since the mortgage interest relief changes introduced by the Government in 2017, but it has certainly accelerated in the past year.

“As a lender that specialises in portfolio landlords, we have always attracted a higher proportion of Limited Company lending, but that has certainly increased, particularly as interest rates, and subsequently mortgage pricing, have risen.”

The research showed the average portfolio size of landlords with at least one property in a Limited Company, as well as the average number of properties held in a Limited Company structure within those portfolios, have increased since the final quarter of 2021, suggesting portfolio landlords remain active purchasers of property.

The average portfolio size for those landlords in the second quarter of the year was 16.9, up from 15.6 in Q1 and 13.1 in the final quarter of 2021. Of those landlords, the average number of properties held within a Limited Company in Q2 was 12.3, up from 11.7 in Q1 2023 and 7.8 in the final quarter of 2021.

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Notes to editors:

BVA BDRC surveyed 983 landlords between 1 and 21 July.

Paragon lends to private individuals and limited companies and provides mortgages suitable for single, self-contained properties, as well as HMOs and multi-unit blocks. Paragon can accommodate higher aggregate lending limits and more complex letting arrangements including local authority leases and corporate leases along with standard ASTs.

Paragon Bank PLC a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £14 billion of assets under management, helping more than 340,000 customers to achieve their ambitions.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551