Over half of landlords plan to use limited companies to buy properties

More than half of landlords plan to use limited companies to buy properties in the year ahead underlining the ongoing transformation of the buy-to-let market.

Research from Precise Mortgages found that 55% of landlords will use limited companies for purchases which is more than double than 24% of landlords who intend to buy as an individual. The latest study confirms the continuing rapid growth in the number of landlords using limited companies to expand their portfolio – in Q4 of 2018 around 44% of landlords planned to use limited companies for purchases and in Q1 of 2019 the number was 53%.

Limited companies are most popular among landlords with a portfolio of 11 or more properties with 71% using them for purchases but it’s still the dominant option for those with portfolios of 10 or fewer with 51% saying they will go down the limited company route to buy their next property compared with only 27% buying as individuals.

Nearly seven in ten (69%) of landlords intend to fund their next portfolio purchase with a traditional BTL mortgage compared with just over six in ten (62%) in Q4 2018, the research shows.

Limited company status is more attractive to landlords as the phased reduction in mortgage interest tax relief does not affect them and they can offset mortgage interest against profits which are subject to Corporation Tax of 19% instead of income tax rates. Interest coverage ratios on limited company applications are also lower than for most individual landlord applications.

Precise Mortgages managing director Alan Cleary said: “Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route particularly for those with larger portfolios.

“The increased use of limited company status is further evidence of how the buy-to-let market is changing and demonstrates how brokers and their clients need expert specialist support when buying as a limited company or considering switching.”

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