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23% more landlords registered Ltd companies last year as tax rises hit

23% more landlords registered Ltd companies last year as tax rises hit

A record number of UK and international landlords registered as a limited company last year to take advantage of tax benefits.

Investment specialist Thirlmere Deacon reports a total of 41,700 buy-to-let incorporations in 2020, an increase of 23% on 2019, taking the total number of buy-to-let firms to 228,743. The numbers have more than doubled since 2016 when tax changes for landlords were introduced via Section 24 of the Finance (no. 2) Act 2015.

Between 2016 and 2020, more companies were set up to hold buy-to-let properties than in the previous 50 years combined. 

Thirlmere Deacon has seen a spike in international investors enquiring about forming a limited company, up 62% year on year. More than a third (34%) of all companies set up to hold buy-to-let properties in 2020 were in London; together, London and the South East accounted for almost half (47%) of all incorporations.

Second largest

Firms set up to hold buy-to-let properties were the second most common founded during 2020, after companies selling goods on-line and by mail order.

Landlords holding property in a limited company have the ability to offset 100% of mortgage interest against profits, while those holding a property in their own name can offset just 20%, says CEO Stuart Williams.

Landlords can grow their portfolio more quickly using a company, as there is no income tax on the retained profit, allowing more cash to re-invest. He says although corporation tax is payable on trading profits, this is lower than the higher income tax rate.

Adds Williams: “Running a portfolio through a limited company is not right for everyone. One of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket. Profits can be used then for anything they choose – all paid for by the tenants.”

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