Over two thirds (69%) of landlords planning to purchase a new buy-to-let (BTL) property will use a limited company structure, Paragon Bank has revealed.

The bank’s Q4 survey of 789 landlords found that of those intending to buy a new rental property in the next 12 months, 25% will purchase a BTL property in personal name, while the remaining 6% said they were unsure.

The survey also revealed that the proportion intending to purchase through a limited company was the second highest on record, with the highest rate set at 74% in the second quarter of 2023.

Although Paragon said there has been a "growth of incorporation" over the past decade, 78% of landlords still own property in personal name.

Nine per cent of landlords own all properties within a limited company structure, although that rises to 28% where the landlord owns four or more properties.

A further 13% have a mix of personal name and limited company properties, although they are typically more heavily weighted towards incorporation, with an average of 74% of properties within these portfolios held within business structures.

Paragon found that the main drivers for holding property within a limited structure are tax benefits and financial planning.

Almost half (45%) of landlords with a limited company property said the impact on personal income tax was a "key benefit", while 42% cited mortgage interest relief.

A third (33%) referenced corporation tax rates on profits, with 27% claiming inheritance tax planning as a benefit.

Head of mortgage sales at Paragon Bank, Jason Wilde, said: "The trend towards limited company structures has accelerated in more recent years, mainly due to changes to mortgage interest relief, but also landlords considering inheritance tax planning.

"Over 80% of our customers are now purchasing within a limited company structure. As many of them operate as SMEs, adopting a business structure makes sense and is more tax efficient. Limited companies also benefit from an interest cover ratio of typically 125%, versus 145% for higher-rate taxpayers buying in personal name, so it broadens the availability of BTL mortgage finance."

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