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Limited company purchases reaches three-year peak – Paragon

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  • 04/07/2022
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Limited company purchases reaches three-year peak – Paragon
The proportion of landlords who plan to purchase their next buy-to-let property through a limited company has hit the highest level for three years.

The survey, which collated responses from around 700 landlords, found that the number planning to set up a limited company in order to purchase a buy-to-let property rose from 50 per cent in the first quarter of the year to 62 per cent in the second quarter, according to Paragon Bank’s research.

The buy-to-let specialist lender said this represented a three-year high in the proportion of investors who intend to purchase their next property utilising a limited company structure.

Paragon’s research highlighted how the propensity to incorporate tends to increase with portfolio size. Just under half, 47 per cent, of landlords who own between one and five properties expect their next purchase to be through a limited company, rising to over three quarters, 78 per cent among those with portfolios consisting of six or more buy-to-let homes.

The survey also found that over the next 12 months, 14 per cent of landlords plan to purchase buy-to-let properties, and around 66 per cent of those planned to finance their next property investment through a buy-to-let mortgage, an increase of four percentage points since the previous quarter.

There was also increase in the proportion of landlords who plan to fund purchases by releasing equity from existing properties, up from 17 per cent in the first quarter of 2022 to 28 per cent between April and June 2022. Conversely, purchasing outright using previously invested funds has decreased in popularity amongst those planning to buy, going from 14 per cent to seven per cent during the same period.

Richard Rowntree (pictured), mortgages managing director for Paragon Bank, said: “Since midway through the last decade, tax burdens on buy-to-let investment have increased significantly. Along with the recent rise in overheads bought about by increasing energy and maintenance costs, running a letting business has undoubtedly become more costly. It is unsurprising to see more landlords look for ways to reduce their costs, with incorporation being one option for some.

“Of course, purchasing buy-to-let property through a limited company may not be the best route for all landlords so it is important that we provide customers with the complete picture to enable them to make informed decisions.”

 

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