Limited Company Landlords: Why More Investors Are Incorporating
Over the past decade, limited company landlords have increasingly chosen to own buy-to-let properties through corporate structures. This trend has accelerated in recent years, with a significant rise in the proportion of properties held within corporate structures.
New research from Paragon Bank highlights this shift, revealing that the proportion of incorporated property within mixed-ownership portfolios has more than doubled since early 2020. This shift in ownership structure has been driven largely by changes in tax regulations, alongside an increasing range of mortgage products tailored to limited company landlords.
A Rapid Shift in Property Ownership
Recent figures indicate that landlords who own property through a combination of personal and corporate structures are now overwhelmingly favouring limited company ownership. As of Q3 2024, an average of 76% of their portfolios were incorporated—an increase from just 36% in 2020.
Despite this rapid rise, most landlords in the UK continue to hold their properties under individual ownership, with 79% of buy-to-let properties still owned personally. However, the trend towards incorporation is significantly more pronounced among landlords with larger portfolios.
Portfolio Size and Limited Company Ownership
The likelihood of a landlord opting for a limited company structure is closely linked to the number of properties they own. Paragon’s research found that:
- Only 7% of landlords with one to three properties have incorporated their portfolios.
- In contrast, 28% of landlords with four or more properties now operate through a limited company.
This suggests that the benefits of incorporation become more compelling for those with larger investments.
What’s Driving the Increase in Limited Company Landlords?
Tax Benefits and Section 24 Changes
One of the most significant factors influencing landlords to incorporate is taxation. The introduction of Section 24 of the Finance Act 2015 has gradually reduced the tax relief available to individual landlords, making corporate ownership a more attractive option.
Under the new rules:
- Individual landlords can no longer fully deduct mortgage interest from their rental income before calculating tax. Instead, they receive only a 20% tax credit.
- Limited companies, however, can still claim 100% mortgage interest relief as an allowable business expense.
This key difference has prompted many landlords—especially those in higher tax brackets—to explore incorporation as a means of maximising profits.
Corporation Tax vs. Income Tax
For landlords paying higher or additional rate income tax, a limited company structure can result in lower tax liabilities.
- Rental income within a limited company is subject to corporation tax, currently set at 25% for profits over £250,000 and 19% for profits below £50,000 (2024/2025 tax year).
- In contrast, individuals face income tax rates of 20%, 40%, or 45%, depending on their total earnings.
This makes incorporation particularly attractive to landlords who fall into the higher tax brackets.
Protection Through Limited Liability
A limited company provides limited liability, meaning that the company itself is responsible for debts rather than the landlord personally. This can offer additional financial protection in the event of economic downturns or legal disputes.
Furthermore, as a separate legal entity, a limited company can continue operating beyond the lifespan of its original shareholders, providing potential benefits in terms of succession planning and inheritance tax mitigation.
Challenges of Operating as a Limited Company Landlord
While the advantages of limited company ownership are clear, this structure does not suit all landlords. There are several drawbacks that need to be carefully considered before making the switch.
Higher Mortgage Rates and Fewer Lenders
One of the most significant downsides is that mortgage rates for limited company buy-to-let properties tend to be higher than those available to individual landlords.
Although more lenders now offer limited company mortgage products, these loans often come with:
- Higher interest rates than personal buy-to-let mortgages.
- Larger deposit requirements in some cases.
- Stricter lending criteria due to the corporate structure.
Despite this, the increasing demand for limited company lending has resulted in a growing number of mortgage options becoming available in recent years.
Additional Costs and Administrative Burdens
Running a limited company involves more administrative responsibilities compared to owning property as an individual. Landlords must:
- Register and maintain a company at Companies House.
- File annual accounts and tax returns, which usually require an accountant.
- Keep separate financial records for the business.
These obligations can result in additional costs, which may offset some of the tax savings, particularly for smaller-scale landlords.
Capital Gains Tax Considerations
If a landlord decides to sell a property held in a limited company, capital gains tax (CGT) is payable on the full amount of profit made, with no tax-free allowance.
In contrast, individual landlords currently receive a £3,000 tax-free allowance (2024/2025 tax year) before CGT applies. This can make individual ownership more attractive when considering long-term exit strategies.
Is Incorporation the Right Choice for You?
Deciding whether to operate as a limited company or remain an individual landlord depends on various factors, including:
- Portfolio size – Larger landlords typically benefit more from incorporation.
- Income tax bracket – Higher-rate taxpayers stand to gain the most from tax savings.
- Long-term investment goals – If you plan to pass on properties to future generations, a corporate structure may be advantageous.
- Financial and administrative capacity – Running a company involves extra responsibilities and costs.
Seeking Professional Advice
Given the complexities involved, property investors should seek professional guidance before making a decision. Louisa Sedgwick, Managing Director for Mortgages at Paragon Bank, emphasises the importance of expert advice:
“Incorporating portfolios isn’t going to be the best move for all landlords. We always recommend speaking to a tax adviser or accountant before making any major structural changes.”
For landlords looking to expand their property portfolios or improve tax efficiency, incorporation can be a smart move—but it’s not a one-size-fits-all solution.
The Future of Limited Company Landlords
With ongoing changes in taxation and lending, it’s likely that the number of limited company landlords will continue to grow. The increasing availability of mortgage products tailored to corporate landlords suggests that lenders are recognising the demand for this structure.
However, as with any investment decision, thorough research and professional advice are essential to ensure that incorporation aligns with financial goals. Whether a landlord chooses to operate as an individual or through a company, understanding the advantages and disadvantages of each structure is key to long-term success in the buy-to-let market.