According to Hamptons, in February there were a total of 401,744 active BTL companies, so investors could move their portfolios from their personal names and reduce their tax burden.
Hamptons said this meant Companies House had more companies registered to hold BTL property than other types of business. It said there were nearly four times as many BTL companies as fast food takeaways or hairdressers.
Since the tax rules were changed in 2016, meaning BTL landlords could no longer claim full mortgage interest tax relief, BTL properties have shifted to limited company vehicles.
In the nine years since February 2016, the number of companies holding investment properties rose by 332% from 92,975 to 401,744.
Hamptons predicted that if the tax rules had not changed, based on the trajectory of BTL companies registered before 2016, there would be around 223,000 fewer by now. The company said most BTL properties would have stayed in personal ownership.
Aldermore Insights with Jon Cooper: Edition 7 – Opening doors in a tougher first-time buyer market
Sponsored by Aldermore
Most new BTL purchases go into limited companies
In 2024 alone, a record 61,517 new limited companies were created, a 23% rise on the previous high of 50,004 in 2023.
This number has risen each year for the last decade, and 30% of all BTL companies are in London, where lower rental yields mean it is more essential to offset mortgage interest.
Some 680,000 properties are held in BTL companies across England and Wales, increasing by between 70,000 and 100,000 each year.
Hamptons said these were not all new rental properties, and in some cases were properties being moved from a landlord’s personal name to their limited company.
It said most new BTL purchases were going into a limited company and estimated this to account for 70-75% of properties bought.
Hamptons said 30-40% of BTL properties placed into a limited company last year were held in firms set up within the last 12 months.
The rest were moved into older companies, with around 90% already holding at least one BTL property.
The firm said this suggested most purchases were being made by established limited company landlords or investors moving properties from their personal names.
Aneisha Beveridge, head of research at Hamptons, said: “The limited company is now the structure of choice for the next generation of investors. Current tax rules mean that most, although not all, new investors find themselves better off in a company structure than owning an investment property in their own name. This means the number of limited companies is likely to continue its upward trajectory for the foreseeable future.
“But 2024 may prove to be a high watermark for the number of new companies set up to hold BTL property. Higher stamp duty rates will be a big barrier for investors looking to move an existing rental home from a personal name into a company structure. It will also weigh down on the number of new BTL purchases overall, likely suppressing the number of companies being set up.”
Rental growth slows
Hamptons found that the pace of rental growth for a newly agreed let was just 1% in the year to February, around a third of the current inflation rate. This was the slowest rate of growth since September 2020, when rents started recovering from the Covid-19 pandemic.
The national rate of growth was brought down by London, where newly agreed rents fell by 2.8% annually and put the cost of moving into a new rental home back to levels seen in May 2023.
In Inner London, rents dropped by 5.1% and were 9.4% below the peak of last year.
Rental inflation in the East and North West of England were the strongest, both at rates of 4.6%.
Beveridge added: “Tenants moving into a new home have seen rental growth grind to a halt, with prices rising at the slowest rate since September 2020. Londoners, in particular, have seen rents go backwards, with Inner London rents now falling at about half the pace they did during the pandemic.
“This means some tenants who moved relatively recently may be able to find themselves a better deal by moving again.”
