Record-breaking three quarters of landlords planning to buy will use limited company structure

According to research from Paragon, which surveyed around 1,000 landlords, 74 per cent plan to buy a property in the next year through a limited company.

This is the highest recorded by the survey and is up from 62 per cent in the first quarter of this year.

Landlords intending to buy in an individual name has fallen to 17 per cent in the second quarter.

Buying through a limited company structure offers several tax benefits as they can deduct mortgage interest from company income and pay tax at corporation tax rates.

There are also more “favourable” mortgage financing options, with interest coverage ratios of 125 per cent typically as opposed to 145 per cent for higher-rate taxpayers.

Limited company borrowers can also secure higher loan amounts, the lender said.

The report continued that the average portfolio size for landlords with at least one property in a limited company in the second quarter of the year was 16.9, up from 15.6 in Q1.

The average number of properties held in a limited company was 12.3, an increase from 11.7 in Q1.

Louisa Sedgwick (pictured), Paragon’s commercial director of mortgages, said: “Holding rental property within a limited company structure has been growing in popularity since the mortgage interest relief changes introduced by the government in 2017, but it has certainly accelerated in the past year.

“As a lender that specialises in portfolio landlords, we have always attracted a higher proportion of limited company lending, but that has certainly increased, particularly as interest rates, and subsequently mortgage pricing, have risen.”