This trend is driven by recent tax changes and rising interest rates, which have made traditional buy-to-let ownership less financially viable.
According to Companies House data, there are now 401,744 buy-to-let firms, surpassing the number of fast food outlets and hairdressers. This marks a 332% increase since 2016, when tax relief on mortgage interest payments was first reduced for landlords.
Ian Parker, Director at Whitley Stimpson says: "The move towards limited company structures is largely a response to the changing tax environment. Landlords are seeking ways to protect their profits and maintain cash flow, and incorporating offers significant tax advantages."
Landlords holding properties in their personal names face limited tax relief on mortgage interest, receiving only a 20% basic rate tax credit. In contrast, those operating through a company can deduct 100% of their borrowing costs, significantly reducing their tax liabilities.
While the benefits are clear, Ian advises caution: "Setting up a limited company involves additional legal obligations and costs. It's crucial for landlords to assess whether the potential tax savings outweigh these factors, especially for those not in the higher tax brackets."
Despite these considerations, the appeal of limited companies remains strong, particularly for landlords with multiple properties. The ability to pay corporation tax instead of capital gains tax, and to claim a wider range of expenses, makes this structure attractive for many.
As the property market continues to evolve, Whitley Stimpson remains committed to providing expert advice to landlords navigating these changes.
Ian concludes: "Our role is to help clients understand the implications of these trends and make informed decisions that align with their financial goals."
For further information visit www.whitleystimpson.co.uk