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7 in 10 buy-to-let landlords now using limited companies

1-minute read

Josh Hall

5 January 2018

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The vast majority of new applications for buy-to-let mortgages are being made via limited companies.

This is according to lender Kent Reliance, which reports that more than 70 per cent of applications it received in the first nine months of 2017 were made using the structure, rather than by individuals.

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The move towards limited companies follows a raft of legislative and tax changes in the private rented sector. Owning property enables landlords to continue to offset mortgage interest payments against tax, a relief that was controversially scrapped for individual landlords last year.

Private sector consolidation

One Savings Bank, which owns Kent Reliance, has suggested that the uptick in applications through limited companies is in part because most professional landlords already operate through these structures, and that these are the parties who are still buying.

In the Kent Reliance survey, which covers 856 landlords, those with portfolios of 10 or more properties made a net addition of one property, while portfolios consisting of less than five properties remained static.

Growth slowing

The report also suggested a slide in growth in the private rented sector, with the number of households renting during 2017 increasing by just 2.2 per cent, compared with eight per cent in 2014.

The lender attributes this slowing to a combination of tax reform and tighter regulations. Despite this, the value of private rented sector housing grew by six per cent during the year, to £1.4 trillion.

Tax risk ahead

The lender also sounded a note of caution for ‘accidental’ landlords facing next year’s tax return. One Savings Bank sales and marketing director John Eastgate said: “The first moment of truth will come in January 2019 when they have to pay their tax bills to the end of April 2018. That’s when they will realise they have less of a tax offset on their rental income than they had before. It will get progressively more difficult for them.”

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