With news in the press that buy to let investing via a limited company has grown at an exponential rate over this year, it’s important to understand if this could be the right decision for you and your property investments as we near the end of the year and look forward into 2025.

The increase in the stamp duty surcharge makes calculating how to achieve a profitable outcome ever more pressing.

Why choose this property investment route?

Fundamentally, the decision on whether to incorporate or not comes down to tax.

A change in tax law in 2017 was imposed under the then Conservative Chancellor or the Exchequer, George Osbourne. The result was a gradual reduction in mortgage interest tax relief, which concluded with landlords paying tax on all rent received and a flat 20% tax credit being introduced instead.

However, under corporation law, mortgage interest remained tax deductible.

Why didn’t all landlords incorporate straight away?

Incorporating, the act of setting up a company to hold your properties in, became a popular choice for many landlords after the change in tax law. It gave landlords an alternative way to claim tax relief on their buy to let mortgages, which helped maintain profitability.

One of the most important factors in a decision on whether to go down the route of limited company buy to let investment is to understand that, when you incorporate, you are changing the legal ownership of the property, just like any property sale.

So, regardless of the fact the property is passing from your personal name, into a company where you are the director, you are still in effect selling the property and your limited company is buying it.

Given potential costs such as Capital Gains Tax on selling an asset and Stamp Duty on buying a property, going through this process can be very expensive.

Getting professional tax advice is vital as your tax advisor may establish that it is not a worthwhile move to make.

Switching all your existing properties into a limited company structure may or may not be right for you. Similarly, you might find changing your existing properties over isn’t the right move, but buying future properties via a limited company structure would be.

Your personal tax position will also be influential in a decision to incorporate. If you are a higher rate tax payer it may be advantageous to make this change in your investment strategy, if you are a basic rate tax payer it may not.

A mortgage advisor is not qualified to tell you what to do tax-wise, you must talk to a professional tax advisor.

But, a mortgage advisor can help you secure a limited company but to let mortgage, once you are clear on the path you are taking. They can also present you with a rate you would be eligible for in personal name and the equivalent via a limited company, so you can give that information to your tax advisor, to inform the decision making process.

Limited company buy to let mortgage rates

Another important factor to bear in mind are your current mortgages. If you are mid-way through a five year fixed rate mortgage, which you secured before the hikes in the Base Rate and mortgage interest rates, for one thing you may be on a very favourable deal.

For another, if you are mid-way through a fixed rate, you are likely to be subject to early repayment charges, if you want to move to a limited company mortgage.

And be clear on this point – you will be unable to stay on a mortgage intended for an individual if you put your properties into a limited company.

Lastly, limited company mortgage rates are typically differently priced to those in personal name. Of late the difference in prices has drawn closer – at one time limited company rates were more expensive than they have become – but, it is another matter for landlords to consider.

Why are more landlords incorporating?

There could be a number of reasons why the number of landlords incorporating has suddenly shot up.

First, until a mortgage renewal date is approaching, borrowers may not be keeping as close an eye on buy to let mortgage rates, or have a need to revise their investment approach to remain profitable.

As borrowers exit fixed rate periods, the upward shift in mortgage rates will become apparent. At this point strategies to maintain profit will have come into sharper focus and more landlords may have started to join those on the path to incorporation.

Second, where investors remained within competitive initial rate mortgage deals, switching to a limited company buy to let rate may not have been a sound move, so that could again have delayed a decision to start down that path.

Thirdly, a tax advisor identifies that only new purchases are worthwhile being made via a limited company structure, and plans to buy were not immediate, then this could have delayed some investors from making the change.

It could also be, simplest of all, that those who would be better off incorporating were not aware of it until more recently, or had not been in a position to make the change.

Buy to let investing into 2025

With a new government came hopes of a solution to the housing crisis. Some landlords have been hesitant and uncertain of the Labour party and it remains vital to be close to the news, as the party takes on this housing challenge.

The increase in the stamp duty surcharge is a blow, but not an insurmountable obstacle for landlords.

The private rental sector remains in huge demand, with tenants queuing up to secure properties in some cases, and there is no evidence to suggest that is going to change.

Meeting housing targets has for decades been a challenge to governments, irrespective of party, so any easing of demand for housing is not a quick fix and may still be beyond reach.

If you have not reviewed your position on incorporation yet, certainly it is a very sensible thing to do. Any business has to adjust to market changes to remain profitable.

The rise in incorporation figures within the property investment industry demonstrates how popular it is and goes to show you could be missing a trick if you do not check your position.

Being prepared is unquestionably a smart approach for 2025 and beyond.

Monitoring limited company buy to let rates

If you have incorporated and are keen to keep up to date with latest rates, you can use Commercial Trust’s free limited company buy to let mortgage calculator, to compare the latest deals. Data from the lenders is updated twice daily, so you can be confident that you are getting accurate information.

If you need mortgage advice from a specialist broker, Commercial Trust are here to help (be aware we cannot give tax advice).

Why work with specialist mortgage broker, Commercial Trust?

• Landlords and property investors like you rate us 4.7/5 on Google.
• Get the best deals and service, due to our daily contact with lenders.
• Work with a business with values of integrity, honesty, openness and trust.
• Use a firm you can rely on, with a Group heritage of over 40 years’ experience.
• Get all the hassle of a mortgage application taken off your shoulders.

Call us for free on 0800 980 6095. No annoying phone menus, just get straight through to an advisor and start discussing your mortgage needs.