Saturday, August 13, 2022

More landlords purchasing BTL through limited companies


There were 41,700 buy-to-let (BTL) incorporations in 2020, a rise of 23% on the year before

The number of UK and international landlords choosing to register as a limited company to manage their portfolios is on the rise, according to research from property investment firm Thirlmere Deacon.

The firm has seen a spike in international investors enquiring about forming a limited company, up 62% year-on-year (YOY).

Last year, there were a total of 41,700 buy-to-let (BTL) incorporations, a rise of 23% on 2019. The numbers have more than doubled since 2016, increasing 128%, when tax changes for landlords were introduced.

Between the beginning of 2016 and the end of 2020 more companies were set up to hold BTL properties than in the preceding 50 years combined. Companies set up to hold BTL properties were the second most common company founded during 2020, with companies selling goods online or by mail order in first place.

Over a third (34%) of all companies set up to hold BTL properties in 2020 were in London. Together, London and the South East accounted for nearly half (47%) of all incorporations.

Stuart Williams, founder and CEO of Thirlmere Deacon, said if landlords hold property in a limited company, they have the ability to offset 100% of mortgage interest against profits, while those holding a property in their own name can offset just 20%.

Investing in property through a company provides landlords with higher levels of tax relief and personal tax savings. Landlords can grow their BTL portfolio more quickly, as there is no income tax on the retained profit, thus allowing more cash to re-invest, he said.

He said: Although corporation tax is payable on trading profits, this is lower than the higher income tax rate. However, running a portfolio through a limited company is not right for everyone.


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