Thursday, March 4, 2021
Landlords

Record number of BTL landlords set up companies

landlords

More companies were set up to hold BTL properties between 2016 and 2020 than in the preceding 50 years combined

A record number of buy-to-let landlords set up holding companies for their properties last year, in a bid to swerve higher taxes. There were 41,700 new companies formed in 2020 – an increase of 23 per cent on 2019, according to estate agent Hampton International.

Buy-to-let incorporations were the second most common type of company founded in 2020, second only to firms selling goods online or by mail order.

More companies were set up to hold buy-to-let properties between the beginning of 2016 and the end of 2020 than in the preceding 50 years combined.

There are now a total of 228,743 buy-to-let companies up and running, an all-time record.

Of the new holding companies set up last year, 34 per cent were based in London.

Hamptons said that this was partly because, with houses being more expensive there, landlords’ mortgage bills were likely to be higher.

Increasing the amount of mortgage interest you can deduct from your tax bill is one of the reasons why landlords switch from holding properties in their personal name to a company.

A series of tax changes for buy-to-let landlords were introduced in 2016, since which time the number of buy-to-let incorporations has risen by 128 per cent.

A three per cent stamp duty surcharge for investors and those buying second homes came in to force that year, and the proportion of interest deductible from tax on buy-to-let properties held in personal names also began to be phased out.

Landlords who hold properties in a limited company can offset 100 per cent of their mortgage interest against profits, while those that hold property in their own name can offset just 20 per cent.

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