The number of landlords who set up buy to let limited companies rocketed in 2020
According to real estate firm Hamptons, the number of landlords setting up a BTL limited company in 2020 was 41,700.
That's a rise of 23% on 2019's figure.
For a landlord creating a limited company, they can save tax after the reduction in mortgage tax relief.
Firms set up to hold BTL properties
The figures reveal that more firms were created to hold BTL properties between 2016 and 2020 than the previous 50 years combined.
Indeed, at the end of 2020, an all-time record for buy to let companies for this purpose was set with 228,743 firms being set-up.
Hamptons' head of research, Aneisha Beveridge, said: "We estimate that half of all rental properties are being put into a company, that is up from one in five in 2016.
"Most of the growth is driven by larger landlords and smaller landlords - especially those who are higher rate taxpayers - are also reaping the tax-saving benefits from incorporating."
Landlords most likely to incorporate
Landlords who are the most likely to incorporate are those in the south.
That is because of the high property costs which mean, says Hamptons, that most properties are will be mortgaged and the landlord's mortgage interest bill will be higher.
Because of this, the benefits that come from having a BTL portfolio that is incorporated into a company will be bigger.
Hampton says that 34% of all firms that were set-up to hold BTL properties last year were in London.
BTL mortgage lenders are entering the market
Ms Beveridge added more BTL mortgage lenders are entering the market as the company buy to let sector matures.
She said: "In 2016, just a handful of lenders offered company BTL mortgages, usually at a greater premium.
"But in recent years, more High Street names have entered the limited company space and the competition has driven down interest rates."
The managing director of Accommodation for Students, Simon Thompson, said: "While there are benefits for landlords having a buy to let incorporated company, they need to consider whether the extra administration is worthwhile, and it is always a good idea to speak with an accountant or financial adviser before doing so."
Landlords are unaware of tax move
Meanwhile, it has been claimed that one in six landlords are unaware that after they file their January 2020 tax assessment, they will no longer be able to deduct their mortgage expenses from their rental income.
The revelation comes from Property Master who say that landlords are unaware that after this month, they will get a tax credit based on 20% of their mortgage interest payments.
The firm’s chief executive, Angus Stewart, said: "It's worrying that so many landlords are unprepared for the fact they can no longer deduct mortgage interest payments."
