Limited companies twice as popular as personal ownership for BTL purchases – Precise

According to specialist lender Precise Mortgages, 55 per cent of the 738 landlords surveyed by BDRC will use limited companies for purchases – this is more than double the 24 per cent of landlords who intend to buy as an individual. 

The research appears to confirm the growth in the number of landlords using limited companies to expand their portfolio – in Q4 of 2018 around 44 per cent of landlords planned to use limited companies for purchases and in Q1 of 2019 the number was 53 per cent. 

Limited companies were most popular among landlords with a portfolio of 11 or more, with 71 per cent using them for purchases.

However, it was still the dominant option for those with portfolios of 10 or fewer properties, as 51 per cent said they will go down the limited company route to buy their next property compared with only 27 per cent buying as individuals.

Growing use of mortgages

The survey also found that 69 per cent of landlords intended to fund their next portfolio purchase with a traditional BTL mortgage compared with 62 per cent in Q4 2018. 

Limited company status has become more attractive to landlords as the phased reduction in mortgage interest tax relief does not affect them and they can offset mortgage interest against profits which are subject to corporation tax of 19 per cent instead of income tax rates.

Interest coverage ratios on limited company applications are also lower than for most individual landlord applications. 

Alan Cleary, managing director of Precise Mortgages, said: “Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route particularly for those with larger portfolios. 

“The increased use of limited company status is further evidence of how the buy-to-let market is changing and demonstrates how brokers and their clients need expert specialist support when buying as a limited company or considering switching.”