Research suggests British landlords are increasingly setting up as limited companies

Almost two out of five, some 38% landlords in the UK plan to use limited companies to buy properties over the next year compared to 28% as individuals, research has found.

Among landlords with more than four properties the percentage buying new property via a limited company rises to 42% while among those with up to three properties it drops to 31%.

The research from specialist lender Precise Mortgages also reveals that landlords in London are the most likely to be planning to purchase through a limited company.

The firm says that the findings underline the continued growth in popularity of limited companies among landlords with 89% of brokers expecting the number of landlords setting themselves up as a limited company to increase with the ability to continue to claim tax relief on mortgage interest seen as the main motivation.

Around 15% of landlords questioned intend to add to their portfolios over the coming year buying an average of two new properties, the study also found and around 23% of those planning to buy will add three or more properties to their portfolio.

The specialist lender has a dedicated portfolio team and proposition to ensure the application process for brokers servicing professional landlords is straightforward. The team’s role is to do the heavy lifting for mortgage intermediaries and their customers, so the process is as efficient and smooth as possible. This has been supported by the launch of an online calculator and access to dedicated portfolio teams.

The research also reveals that landlords with larger portfolios are significantly more aware of the Prudential Regulation Authority (PRA)’s lending criteria and portfolio application process changes.

Overall, less than half, some 45% of all landlords are aware of PRA changes but that rises to 67% among landlords with four or more buy to let mortgages. However, 74% of those with larger portfolios say the changes have made it more difficult to secure buy to let finance, underlining the growing demand for specialist lenders.

‘Buying property within a limited company structure has become increasingly popular, particularly among larger professional landlords. Given the predicted rise in landlords switching to limited company status this year, we can expect this trend to continue,’ said Alan Cleary, managing director of Precise Mortgages.

‘The contrasting levels of awareness of the PRA’s recent changes to lending criteria and the application process between small and larger portfolio landlords points to the growing professionalisation of the latter group who stand to be the most affected,’ he added.