Seven out of 10 landlords planning to purchase a new buy to let property will utilise a limited company structure, says Paragon Bank.

Its survey of 789 landlords in the fourth quarter of 2024 found that of those intending to purchase a new rental property in the next 12 months, 69% plan to do so via a limited company. A quarter will purchase in personal name, with the remainder unsure.

The survey, conducted on behalf of Paragon by Pegasus Insight, found that the proportion intending to purchase through a limited company was the second highest on record, previously only beaten by 74% recorded in the second quarter of 2023.

Despite the growth of incorporation over the past decade, the majority of landlords, 78%, still own property in personal name.

Nearly one in 10 (9%) own all properties within a limited company structure, although that rises to 28% where the landlord owns four or more properties

A further 13% hold a mix of personal name and limited company properties, although they are typically more heavily weighted towards incorporation, with an average of 74% of properties within these portfolios held within business structures.

The primary drivers for holding property within a limited structure are tax benefits and financial planning. Nearly half of landlords with limited company property, 45%, said the impact on personal income tax was a key benefit, with 42% citing mortgage interest relief. A third referenced corporation tax rates on profits, with 27% claiming inheritance tax planning as a benefit.

Those with no limited company property cited the costs of transferring assets into a corporate vehicle as the main barrier (52%), followed by capital gains tax uncertainty (32%) and the administration costs and effort of running a limited company (31%).

Jason Wilde, Paragon Bank head of mortgage sales, says: “The trend towards limited company structures has accelerated in more recent years, mainly due to changes to mortgage interest relief, but also landlords considering Inheritance Tax planning. 

“Over 80% of our customers are now purchasing within a limited company structure. As many of them operate as SMEs, adopting a business structure makes sense and is more tax efficient. Limited companies also benefit from an interest cover ratio of typically 125%, versus 145% for higher-rate taxpayers buying in personal name, so it broadens the availability of buy-to-let mortgage finance.”