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.”
