Insight from Paragon Bank into over 500 landlords revealed that younger landlords were holding BTL properties in a limited company from the outset.
The lender’s report, How limited company ownership is becoming the new normal, found that 29% of landlords exclusively held properties in a company structure. A further 36% split the ownership of properties between limited companies and their personal names, while 65% had set up at least one special purpose (SPV) for BTL investments.
Paragon found that the limited company BTL trend was being propelled by landlords who were younger, as 57% of those aged between 25 and 34 held properties in limited companies, while 43% were owned through a mix of corporate and personal names.
By comparison, 46% of respondents between the ages of 35 and 44 had properties in a limited company structure, while 39% had mixed ownership. Paragon found that the proportion of landlords holding properties in limited companies decreased among older respondents.
Limited company ownership was favoured among landlords who were newer to the sector, as 80% of those who had been operating for five years or fewer held properties this way. Some 11.5% held properties in their own name and 7.5% had mixed ownership, while 1% held investments in a limited liability partnership.
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The share of landlords holding properties in SPVs fell to 40% for landlords with 6-10 years of experience and 21% among those with 11-20 years’ experience in the sector. It was lowest among those who had been in the private rental sector for 21 years or more, with just 16% holding properties in a limited company.
Younger landlords benefit from more advice
Louisa Sedgwick (pictured), managing director of mortgages at Paragon Bank, said: “In a bid to mitigate the impact of tax changes introduced in the latter half of the previous decade, the last 10 years have seen more and more landlords opt to hold their BTL properties in limited companies. Interestingly, our research shows that younger and newer landlords are more likely to structure their portfolios this way and do so earlier on in their landlord careers.
“This is something we’ve seen more of and recent enhancements to our mortgage application system are supporting these landlords. We’ve streamlined applications for simple BTL cases, significantly cutting the number of supporting documents we ask for and speeding up the journey.”
Sedgwick added: “In part, I think that these landlords benefit from more advice and education on the benefits and key considerations than those who came before them. With some of our older, more experienced landlords perhaps eyeing retirement, helping the next generation of landlords to succeed is vital, so this support can only be a good thing.”
