The story of the past five years in the buy-to-let mortgage market has been the shift towards limited company lending.
Industry data, alongside Paragon’s own lending figures, highlights how limited company property ownership has become increasingly prominent, with the number of Special Purpose Vehicles (SPVs) established each year increasing fourfold between 2016 and 2024.
While limited company ownership was once the preserve of landlords with complex requirements, today it is very much mainstream. Our business consists predominantly of the limited company variety.
The findings of our latest report, How limited company ownership is becoming the new normal, suggests that it is primarily younger landlords and those relatively new to buy-to-let property who are adopting this strategy from the outset of their landlord careers, driving the growth.
Amongst landlords aged 25-34, 57% of properties are held in limited companies, while 43% are owned through a mix of corporate and personal names. In the 35-44 bracket, limited company holdings fall to 46%, with another 39% mixed, placing them just behind the youngest group in SPV adoption, something that broadly declines as landlord age increases.
Limited company ownership is proportionally higher among newer landlords and falls with experience.
The increasing use of SPVs to hold property looks set to continue, with a significant proportion of landlords planning to purchase more properties this way, in addition to incorporating some of those that they already own.
Again, landlords in the younger age bracket and those who are newer to the market are most likely to lead this trend, with a greater propensity to build their portfolios.
Clearly, the driving factor of this shift to corporate ownership of buy-to-let property was the removal of mortgage interest relief, introduced in the latter half of the previous decade, but Inheritance Tax planning is also a key factor, amongst other tax benefits.
We all await the Government’s Budget at the end of November, but any changes to the tax arrangement of property held in personal name is likely to accelerate the transition to a limited company market.
In addition to exploring the reasons for the shift in more detail, we surveyed over 500 landlords and supplemented this insight with third party data to create a report that covers different facets of limited company ownership.
This includes the barriers for landlords with existing properties held in their own name to move them to a limited company structure, namely expensive Stamp Duty and Capital Gains Tax charges.
The good news for landlords looking for limited company mortgages is the myriad of options now open to them. However, while I could be accused of ‘well, you would say that’, not all lenders are the same in this field. As one of the original panel lenders when buy-to-let was first launched as a term in 1996, buy-to-let is in our DNA and we have been operating in segment of the market for over a decade.
We have built up the experience and expertise in the limited company market that some of our newer peers may not necessarily boast. Plus, we continue to innovate, including streamlining our application process for landlords with 15 or fewer properties.
For those considering the limited company approach, I would recommend two things (lenders can’t offer direct advice) – a good accountant or tax adviser and a good mortgage broker. Both will be able to help clients structure their arrangements in a manner which will facilitate future growth.
Russell Anderson is Mortgages Commercial Director at Paragon Bank
