The trend of portfolio landlords incorporating properties into limited companies continues unabated, according to new research from Paragon Bank.
Findings show that the proportion of incorporated property in landlord portfolios has more than doubled since the first quarter of 2020 highlighting a growing preference for this ownership model.
The research, conducted by Pegasus Insight on behalf of Paragon Bank, highlights that 12% of landlords operate a mix of individual and limited company ownership.
Within this group, an average of 76% of their portfolios – equating to 13.1 properties – were incorporated by the end of Q3 2024.
TREND SHIFT
This marks a sharp increase from 36% of portfolios, or 6.3 properties, in Q1 2020, and a further rise from nine properties incorporated during the same period in 2023.
While individual ownership remains the dominant structure, with 79% of landlords holding portfolios solely in their names, the appeal of limited company ownership is evident.
Only 9% of landlords have fully incorporated their portfolios, yet limited company ownership is notably higher among those with larger portfolios.
For landlords with one to three buy-to-let properties, just 7% have fully incorporated.
This figure climbs to 28% for landlords with four or more properties, pushing the average number of properties held in limited companies to 13.1 compared to the overall portfolio average of 8.0.
TAX EFFICIENCY
Louisa Sedgwick, managing director for mortgages at Paragon Bank, attributes the growth to tax efficiencies and says: “The trend towards holding properties in limited companies doesn’t seem to be slowing down. In fact, these figures show that it’s growing amongst landlords who have found it can deliver benefits, particularly around how much their income is taxed.”
Sedgwick also highlights the potential for brokers to capitalise on this trend.
“The majority of properties, 79%, are owned in individual names, hinting at opportunities for limited company lending. Brokers can enhance their offerings by deepening their knowledge of this sector, including the lenders who excel in handling such applications,” she adds.
PROFESSIONAL ADVICE
Despite its appeal, Sedgwick cautioned against a one-size-fits-all approach. “Incorporating portfolios isn’t going to be the best move for all landlords. We’d always recommend seeking professional advice, typically from a tax adviser or accountant, before making such decisions.”
