The number of landlords who utilise company structures and incorporate their portfolios has seen a sharp rise over the last four years, Paragon Bank has revealed.

In Q2 2020, almost half (48%) of the portfolio of the average landlord who utilises a limited company structure was incorporated.

However, this has now increased to 81% in Q2 2024.

Paragon Bank said this trend is likely to continue, with two thirds (67%) of landlords who intend to buy in the next 12 months saying they plan to do so through a limited company.

This proportion has also grown “significantly” since Q2 2020, when it stood at 45%. In contrast, just 31% plan to buy in a personal name, falling from 36% in the same period.

This strategy is adopted by more experienced landlords as the propensity to own properties through limited companies increases with portfolio size.

This ownership mechanism is adopted by 37% of landlords who have four or more buy-to-let (BTL) mortgaged properties, compared to 15% amongst those with between one and three BTL homes.

Separate research undertaken for Paragon’s mortgage intermediary insight report (MIIR), shows that brokers agree.

Paragon’s summer wave of the report revealed that growth in business written for portfolio landlords who utilise limited company structures is anticipated by three in five (60%) brokers over the next 12 months, following a notable increase of 11 percentage points since the previous MIIR in Q1 2024.

Managing director for mortgages at Paragon Bank, Louisa Sedgwick, said: "Landlords have increasingly used limited companies to mitigate the impact of tax changes phased in from 2016. This has accelerated in recent years as more landlords have looked for ways to run their business more efficiently amidst a challenging economic environment.

"It’s really encouraging to see that brokers appear to be switched on to this because, despite the growth, 78% of landlords still hold their properties solely in individual name. While incorporation isn’t necessarily the best option in every situation, and landlords should seek advice from a professional financial or tax adviser, this highlights the opportunity for those that place this type of business."

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