Buy-To-Let Limited Companies Increased 23% in 2020

Nearly 42,000 new limited companies compared to those established in 2019.

Homeowners set up 41,700 Buy-To-Let limited companies in 2020, an increase of 23% from 2019, according to Hamptons research. Using a limited company allows homeowners to save on taxes after reducing the mortgage tax relief.

Aneisha Beveridge, Hamptons head of research, said: “Despite the slowdown in private rental sector growth in recent years, an increasing proportion of buy-to-let purchases are now being made in limited companies.”

“We estimate that around half of all rental properties purchased today are being incorporated into a business, up from nearly one in five during 2016.”

“While most of this growth has been driven by larger homeowners, smaller homeowners, particularly those who are higher ratepayers, have also reaped the tax savings benefits of incorporation.”

More companies were established to hold buy-to-let properties between early 2016 and late 2020 than in the previous 50 years combined.

At the end of 2020, there were a total of 228,743 buy-to-let companies in operation, a historic record.

South-based homeowners have been more likely to join. Given the high cost of the property, in general, South-based homeowners are more likely to be mortgaged, which means that in cash terms, their mortgage interest bill is likely to be higher.

Therefore, the benefits of incorporating a buy-to-let portfolio into a company are likely to be bigger.

More than a third (34%) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47%) of all new additions.

Beveridge added: “As the company’s buy-to-let market has matured, more mortgage lenders have entered the space.”

“Back in 2016, there were just a handful of lenders who offered company buy-to-let mortgages, often at a greater premium than today.”

“But with more street names entering the limited company space in recent years, competition has lowered interest rates to one percentage point of similar products designed for homeowners buying on their own behalf.”

“December marked the first time since the start of the pandemic that the number of potential tenants exceeded 2019 levels.”

“At the same time, the number of rental homes on the market fell by double-digit percentages in all English regions outside of London.”

“This has driven rental growth significantly over the past three months to a point where rents are increasing faster than house price growth in almost all regions.”

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