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More UK Property Investors Operating Via Limited Companies in 2024

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    Data Suggest More Buy-to-Let Landlords to Purchase Under Limited Companies

    According to research from Paragon Bank, the number of buy-to-let investors purchasing properties via limited companies has increased. The study also shows that 2024 looks to be a busy year for limited companies as buy-to-let investment becomes more affordable.

    Following changes to mortgage interest tax relief regulations in 2017, landlords saw the amount they could claim to reduce the tax bill lower. As such, this has tempted many landlords to make property investments through a limited company.

    Paragon Bank’s research echoes this notion, finding that 49% of brokers expect business conducted by landlords with limited company portfolios to improve in 2024. In addition, the study also showed that 45% of brokers expected the number of non-portfolio limited company landlords to increase as well.

    In contrast, around 33% of brokers think the level of landlords with limited companies making buy-to-let property investments will stay the same. In comparison, 11% expect more investors to take out mortgages under their name.

    Paragon Bank research shows that 29% of portfolio landlords operate via a limited company, compared to 15% of non-portfolio investors who only own one buy-to-let property.

    Discover More: Learn more about the UK buy-to-let scene with our guide to London property investments.

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      Is Buying Property Through a Limited Company the Right Way to Go?

      According to Paragon Bank research, most (82%) landlords who own six or more properties prefer utilising limited companies to acquire and manage their properties. This highlights the advantageous nature of this structure, especially for those with higher property income.

      However, as Louisa Sedgwick, the Commercial Director of Mortgages at Paragon Bank, notes: “At the same time, there are benefits associated with using a limited company; it may only be preferable for some investors. I think intermediaries are right to expect to see more limited company business this year. It is a structure that has become increasingly popular with landlords in recent years as they have responded to Government changes to the tax treatment of buy-to-let property ownership.

      “Owning properties through a limited company can enable landlords to offset finance costs, such as mortgage interest, against rental income. It’s wise for borrowers to seek professional advice because incorporation may not be the best route for all landlords, and the benefits can vary based on individual circumstances.”

      In 2023, another survey by Paragon Bank showed that roughly three-quarters of landlords planning on buying a new buy-to-let property in 2024 would conduct their business via a limited company structure.

      Read More: Want to learn more about the UK property scene? Get into some of our handy buy-to-let area guides, including:

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      What Are the Benefits of Buying Property Through a Limited Company?

      Using a company to buy and rent out property differs in terms of taxes compared to doing it as an individual. In 2017, the government phased out mortgage interest tax relief for landlords, causing some to face higher income tax bills when investing in property in the UK.

      The relief was replaced with a 20% tax credit, affecting higher-rate taxpayers who used to get 40% tax relief on mortgage payments. This change only impacted private landlords, whether individuals or couples.

      Meanwhile, those using limited companies could still claim the same mortgage interest costs, reducing their tax bill. Limited companies also pay corporation tax rates instead of income tax rates, which can be advantageous.

      However, there are drawbacks to consider. If you don’t have a mortgage or have a lower income, setting up a company might not be worth the hassle and legal fees. Additionally, if you already own a property as an individual, transferring it to a company would incur a stamp duty charge.

      If you want to know more about this subject, check out our guide on buying a property through a limited company. Alternatively, you can dive into our article on stamp duty for a second property.

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      Dale Barham

      Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.