Rise in limited company set-up fee unlikely to deter landlords, brokers say

At the beginning of the month, Companies House confirmed that it would be increasing various fees, with one key example being setting up a limited company, which has risen from £12 to £50.

This type of buy-to-let (BTL) lending has grown in popularity since former Chancellor George Osborne restricted mortgage interest tax relief for landlords, leading many to go down the limited company route so they can deduct mortgage interest payments and other fees.

Figures from Hamptons show that a record number of BTL limited companies were set up last year, at 50,004. This is an increase from the previous record of 48,502 in 2022.

Dariusz Karpowicz, director at Albion Financial Services, said that the recent rise in the cost of setting up a limited company, a sharp 316% increase to £50, might seem steep, but was “unlikely to deter investors from opting for a limited company structure for buy-to-let investments”.

He explained: “This upfront cost is relatively minor in the context of overall investment expenses and potential tax benefits. It’s essential for investors to consult with a property tax specialist to crunch the numbers and ensure that the structure aligns with their financial goals.

“Recently, there has indeed been a noticeable uptick in buy-to-let applications through limited companies, suggesting that many see the benefits outweighing the initial costs. Investors should remain vigilant about ongoing obligations and tax implications of this set-up to make the most informed decision.”

Stephen Perkins, managing director at Yellow Brick Mortgages, said: “Whilst this is a large fee increase in percentage terms, no property investor is going to be put off by an additional cost of £38 to register a limited company/specialist purpose vehicle.

“After all, many pay more than this by setting their limited company up through their accountant, rather than doing this themselves. Investors will seek tax advice and weigh up the pros and cons of limited company buy to let against those in the personal name, and the small fee to register a company will likely not be a pivotal factor in that decision.”

Some views were gathered from Newspage.