Investing in property in the UK using a limited company structure has been surging in popularity, and landlords reveal the reasons why.

New research released by GetGround has revealed a further increase in the number of Landlords operating in the UK who have moved over to a Limited company structure for their investments. 

It showed that around 75% of landlords now have at least one property held in a limited company structure, while 49% of these said they had done so for the first time within the last 12 months – a clear sign of a soaring trend. 

The poll also showed that 93% of so-called limited company landlords actually manage less than half of their total investment portfolio in this way. However, the process of moving existing properties into limited company ownership can be complex, which could explain why landlords are not keen to do this. 

What’s driving the limited company movement?

The driving force behind most decisions for the vast majority of landlords and property investors is profits, and 93% of landlords said their investments proved more profitable when they were held in a company.

Another benefit, cited by 57% of respondents, is the limited personal liability that is involved in such a structure. The same number said that co-investment among multiple people is easier to do through a limited company. 

Current and ongoing events are also driving the increase, it seems, with 78% of people saying this investment method helped them mitigate the impact of inflation. 

Moubin Faizullah Khan, CEO of GetGround, said: “Industry data is creating an exciting picture of limited company adoption across the landlord community, but until now it’s not been entirely clear how many individual landlords are using limited companies and how extensively used they are among landlords’ portfolios.

“Our final poll for 2022 shows that awareness and adoption of incorporations is fast growing, and importantly, for the right reasons. 

“Whether it’s affordability, protection against risk, financial viability or acting responsibly and transparently, incorporating your investments pays off. It is reasonable to expect that limited company adoption will continue to accelerate as we move into 2023.”

A question of tax

A further major benefit of operating through a corporate structure is that the owner should be able to take advantage of more favourable tax rates. This is particularly important since Section 24 took effect. The tax change affects higher rate taxpayers the most, so these are the most likely candidates to be looking into a limited company.

For those operating through a corporate structure or limited company, the full interest amount can still be offset against profits, and these are subject to corporation tax (currently 19%) instead of individual income tax, while a variety of reliefs are also available.

For smaller landlords, such as those with just one property, or those in the lowest income tax bracket, the benefits may be less. Particularly for those who already own the property, this would involve effectively selling it to the company, which could incur stamp duty and other costs.

Obtaining a mortgage for a limited company buy-to-let is also generally more expensive and more complex compared to a standard buy-to-let. The associated costs involved with setting up and running a limited company in the first place must also be considered by any landlord thinking of making the switch.

At BuyAssociation, our team of property investment consultants are experienced in dealing with investors who use limited company structures. We can also put you in touch with one of our independent partners if you’d like more information. Get in touch today to find out more, or to register your interest in UK property investment opportunities.