Tax is usually the main reason landlords consider incorporation. Following the phasing in of the ‘Section 24’ changes, they can no longer deduct mortgage interest from rental income before calculating tax. This change increased the tax bill and hit the profits of many landlords, particularly higher-rate and additional-rate taxpayers.

Limited companies aren’t affected by these rules and can still offset mortgage interest before calculating corporation tax. This can significantly cut tax costs for many landlords. On top of this, a company structure allows more flexibility around how they can withdraw profits through salary, dividends, a director’s loan or reinvestment in the business.

For higher-rate taxpayers in particular, tax efficiency is often the tipping point that convinces them to look at incorporation.

A company structure can offer potential advantages for inheritance planning. Instead of passing on property itself, landlords can transfer shares in the company, which can be simpler and more flexible.

This ability to gradually hand over ownership can help with long-term succession planning, making it easier for landlords to bring their children into the business, for example, and helping with continuity if one director leaves the business. This can be useful for many clients, but especially those who see their property portfolio as a long-term family asset.

Owning property in a limited company means the business, rather than the individual landlord, is legally responsible for its debts.

This ‘limited liability’ offers a layer of protection for landlords, especially those with larger or more complex portfolios.

In practice, lenders will often still require directors to provide personal guarantees to get a mortgage, but not always. But the separation between personal and business assets is appealing, as it reassures landlords that their property investments are ring-fenced.

Limited companies can claim a wide range of expenses against profits, particularly mortgage interest, but also a host of other professional fees and costs.

This can help landlords boost profitability while running their portfolios in a more structured way and keep a clearer line between personal finances and property income.

But remind them to check with an accountant if they’re unsure about what is an allowable expense.

Finally, many landlords simply want the professional image of operating through a limited company. For those building a portfolio for the long term, incorporation signals that they are treating their investment as a business.

This can potentially make it easier to bring in business partners or directors and to support scaling up.

Incorporation isn’t always the right choice for landlords, and your clients need to understand this. Highlight the possible downsides as well as the benefits so they have the full picture:

• Costs and admin: from higher accountancy fees to annual filings, there’s an added layer of complexity and costs.

• Tax charges on transferring properties: moving existing properties into a company can trigger Capital Gains Tax and stamp duty, which could be expensive.

• Limited benefits: not all landlords will see tax advantages to incorporating, especially basic-rate taxpayers with smaller portfolios, as well as landlords with modest mortgages.

• Product choice: the range of limited company mortgages has grown massively in the last 10 years, but there are still fewer options than in the personal market.

The message for your buy-to-let clients is clear: limited company buy-to-let could be better for their overall strategy, but it isn’t guaranteed or a one-size-fits-all solution. Professional tax advice is essential, so always recommend that landlords speak to an accountant or tax adviser.

The growth of limited company buy-to-let is a clear opportunity for brokers. More landlords are thinking about it, driving demand for advice on mortgage options and guidance around the pros and cons.

Brokers who can have these conversations confidently are best placed to take advantage of this growing sector.

You don’t need to be a tax specialist, but you do need to understand the key drivers and drawbacks and know when and where to refer clients for expert advice.

At BM Solutions, we recognise how important limited company lending is to the overall buy-to-let market. Our new proposition has been designed with brokers in mind, offering the same speed, consistency and technology that you already associate with us, as we explained in Five things you need to know about BM’s limited company proposition.

From competitive products to a dedicated support team, we’re here to help you place limited company cases with confidence.

Limited company buy-to-let isn’t right for every client, but it’s a shift that brokers can’t afford to ignore. With the right advice and lending partner, you can make sure your landlord clients are prepared for the future of buy-to-let.

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