Research undertaken for Paragon’s How limited company ownership is becoming the new normal report found that the increase in the proportion of buy-to-let property held in limited company structures, seen over the past decade, is likely to continue, spearheaded by younger and newer landlords.
A survey of over 500 landlords revealed that just under two-thirds, 63%, expect to make future property purchases through Specialist Purchase Vehicles (SPVs). This is an average across all age groups, with Paragon’s analysis highlighting how the propensity for limited company purchase is highest amongst the youngest cohort and decreases with age.
Every survey respondent aged 25-34 intends to use limited companies for future acquisitions, compared to eight in ten (82%) landlords in the 35-44 age group and almost three quarters (73%) of those aged 45-54. Approximately half of landlords - 54% and 48% - in the 55-64 and 65-75 age groups plan to use SPVs for buy-to-let property purchases in future.
The survey also revealed that a third of landlords (32%) intend to transfer properties held in personal name into a limited company structure in the future.
Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, said: “Our research shows how owning property via a limited company structure has become increasingly popular over the past decade, driven by changes in taxation.
“Nearly two thirds of landlords intend to make future purchases through limited companies, so we expect the overall proportion of property held within a company structure to increase steadily in the coming years, particularly when you include those landlords who will incorporate existing property from personal name.”
She added: “It’s encouraging to see that they will continue to adapt in this way, particularly the next generation of landlords who seem to have realised the potential benefits of this ownership structure early in their lettings business careers.”
Paragon’s report highlighted a substantial increase in the proportion of landlords utilising limited companies. Growing steadily throughout the last decade, it is likely that a key influence is the removal of Section 24, announced in 2015. This policy change took away landlords’ ability to deduct costs, such as mortgage interest, before paying tax on the income earned through letting.
