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Buying via limited company proving more popular among landlords

More than half (55%) of landlords plan to use limited companies for purchases compared to 24% of landlords who intend to buy as an individual, new research from Precise Mortgages has found.

The research underlines the ongoing transformation in the buy-to-let (BTL) market and the increase in landlords using limited companies to expand their portfolio. In Q4 2018 around 44% of landlords planned to use limited companies for purchases and in Q1 of 2019 the number was 53%.

Limited companies proved most popular among landlords with a portfolio of 11 or more properties with 71% using them for purchases. However, it’s still the dominant choice for those with portfolios of 10 or fewer with 51% saying they will go down the limited company route to buy their next property compared to only 27% buying as individuals.

What’s more, the research shows that nearly seven in 10 (69%) landlords intend to fund their next portfolio purchase with a traditional BTL mortgage compared with just over six in 10 (62%) in Q4 2018.

Limited company status is more attractive to landlords as the phased reduction in mortgage interest tax relief does not affect them and they can offset mortgage interest against profits, which are subject to Corporation Tax of 19% instead of income tax rates. Interest coverage ratios on limited company applications are also lower than for most individual landlord applications.

Alan Cleary, managing director of Precise Mortgages, said: “Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route particularly for those with larger portfolios.”

“The increased use of limited company status is further evidence of how the buy-to-let market is changing and demonstrates how brokers and their clients need expert specialist support when buying as a limited company or considering switching.”

  • G romit

    With Sec.24 phasing who would have thought that investors would switch to buying through a limited company.

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