Landlords across the UK are setting up limited companies at an unprecedented rate to take advantage of more favourable tax conditions. Research from Hamptons reveals that 70% of new buy-to-let purchases in England and Wales this year have been made through limited company structures, a significant increase driven by the current tax environment. Experts believe this trend will continue as landlords look to safeguard their investments against potential tax hikes.
Surge in limited companies for buy-to-let properties
According to Hamptons, the creation of buy-to-let companies has surged, with 5,312 new limited companies being set up last month alone. By the end of 2024, it is expected that between 60,000 and 62,000 such companies will have been established, surpassing last year’s total of 50,004.
Aneisha Beveridge, Head of Research at Hamptons, highlighted the trend, saying: “Most new purchases are now made in a company structure. There’s also been a significant rise in the number of landlords moving homes they own in their personal name into a company to shelter from an increasingly aggressive tax environment.”
Tax benefits driving the shift
The primary driver behind this shift is the growing tax burden on individual landlords. Limited companies offer tax advantages, such as exemptions from Capital Gains Tax (CGT) on property sales. CGT has become a focal point in the UK tax landscape, with speculation that Chancellor Rachel Reeves may increase CGT in the upcoming Budget. This uncertainty has prompted landlords to reassess their property ownership strategies.
Moreover, limited companies allow landlords to benefit from lower corporate tax rates, which can make property investment more profitable. This has been especially appealing given the increased pressure on individual landlords from tax changes implemented in recent years, including the phased removal of mortgage interest relief.
Regional hotspots for company formations
The trend is particularly strong in the South of England, where nearly 60% of new buy-to-let companies have been formed. This regional skew reflects the higher property values in the South, making tax efficiency even more critical for landlords operating in these markets.
While the South leads in terms of the number of new companies, landlords nationwide are recognising the benefits of switching to limited companies. This shift is not only limited to new purchases; many landlords are transferring properties held in their personal names into corporate structures to optimise their tax liabilities.
A growing trend with potential implications
As the UK government continues to tighten tax regulations for landlords, more are expected to adopt limited company structures. This move could have broader implications for the rental market, as it may influence property supply and affordability. The shift to limited companies demonstrates how landlords are adapting to changing financial landscapes, seeking to preserve their profitability in an increasingly complex tax environment.
The post Landlords shift to limited companies to capitalise on tax advantages appeared first on Landlord Knowledge - Landlord News, Information, Guides & Forum.Landlord Knowledge - Landlord News, Information, Guides & Forum - Providing essential and free landlord news, information, guides & advice.