Incorporation remains popular with landlords – last month saw 5,312 new limited companies set up to hold buy to let property across Britain.
Analysis of Companies House data by Hamptons, the Connells-owned brand, shows that this figure now stands 28% higher than the previous September 2023 record. It also represents the third-highest monthly figure on record, following the 5,854 set up in April 2024 and 5,442 in February 2024.
The record number of new incorporations so far this year means there were a total of 46,449 companies set up between January and September 2024, a 23% increase on the same period last year, which itself marked the highest year for new incorporations (chart 2).
This means that more companies have been set up so far this year than during the whole of 2021.
The increase has been driven by the different ways buy to lets in companies and buy to lets in personal names are taxed.
With landlords no longer able to fully claim mortgage interest as a cost, more new purchases are going into a company structure. Furthermore, existing investors are also shifting their buy to lets into limited companies to reduce their tax burden. Given that properties sold by companies are not subject to Capital Gains Tax, any increase will deepen this divide.
Hamptons says that y the end of this month, it’s likely that more limited companies will have been set up to hold buy to let property than in the whole of 2023. This means that by the end of 2024, between 60,000 and 62,000 limited companies will have been created, exceeding last year’s total of 50,004.
Some 59% of these new companies have been set up in the South of England, where higher interest rates have hit hardest and where a larger share of households are higher-rate taxpayers. It is these landlords who are most likely to benefit from incorporating.
However, only 42% of properties bought by limited companies so far this year have been in the South of England. This highlights how many Southern-based landlords are investing in the Midlands or North of England where yields tend to be higher.
There are now a total of 382,007 companies across Great Britain set up to hold rental property. Nearly three-quarters (74%) of these have been incorporated since the start of 2016, the point at which landlords who were higher-rate taxpayers stopped being able to fully offset their mortgage interest from their tax bill.
The rising number of companies set up to hold buy-to-let properties means the vast majority of new landlord purchases now go into a limited company. So far this year, 70% of new buy-to-let purchases in England & Wales were made using a limited company, with the remaining 30% being bought in personal names.
In total, there are 666,831 properties held inside a buy-to-let limited company structure across England and Wales. This figure has increased 175% from 242,249 a decade ago. But despite most new purchases going into a limited company structure, only around 15% of all rental homes owned by private landlords are held in such a way.
Prior to 2016, the limited company structure tended to be the preserve of larger landlords. However, the growing tax advantages for higher-rate taxpayers have attracted the attention of smaller investors. So far this year, 54% of new purchases have been made by companies who are making their first, second or third purchase.
This article is taken from Landlord Today