Hamptons reports that the main reason for this trend is the widening gap between personal and corporate tax rates.
This uptick started accelerating in 2016 when changes to tax legislation started having a greater impact on higher-rate taxpayers. 74% of the current 382,007 rental property companies in Great Britain have been established since this year. Following these changes, landlords have been unable to offset their mortgage payments as a cost fully; instead, they receive a 20% tax credit, pushing up tax bills for higher-rate taxpayers.
Interestingly, there appears to be some regional variation in the findings. Hamptons found that 59% of new limited companies were set up in the South of England, where property is typically more expensive. Higher interest rates have hit these regions hardest, and a larger proportion of households are higher-rate taxpayers.
That said, only 42% of properties acquired by limited company landlords this year are in the South, suggesting that many Southern property investors are now looking at more northern regions for higher yields.
This trend has been ongoing for a while as northern markets have been outperforming the South and offering more affordable properties in high-demand rental markets. RWinvest specialises in North West property, allowing investors to take advantage of these thriving property hotspots. Our flagship Liverpool development, The Gateway, is nearly completely sold out, with just a few apartments left, showing the popularity of northern developments among investors.