Limited companies twice as popular as individual lending

Buying a buy-to-let property via limited company is now more than twice as popular as buying as an individual, according to new research from Precise Mortgages.

Related topics:  Mortgages   |   Rozi Jones
8th August 2019
BTL buy to let sign
"It will continue to be the most preferred purchase route, particularly for those with larger portfolios."

55% of landlords plan to use limited companies to buy properties in the year ahead, compared to 24% of landlords who intend to buy as an individual.

Limited company lending continues to grow, increasing from 44% of all purchases in Q4 2018 and 53% in Q1 2019.

Limited companies are most popular among landlords with a portfolio of 11 or more properties with 71% using them for purchases.

51% of those with portfolios of 10 or fewer with 51% say they will go down the limited company route compared with 27% buying as individuals.

Limited company status is more attractive to landlords as the phased reduction in mortgage interest tax relief does not affect them and they can offset mortgage interest against profits which are subject to Corporation Tax of 19% instead of income tax rates.

Interest coverage ratios on limited company applications are also lower than for most individual landlord applications.

Alan Cleary, managing director of Precise Mortgages, said: “Despite the challenges in the market, professional landlords have still managed to grow their portfolios over the past year with the use of limited companies, and it will continue to be the most preferred purchase route, particularly for those with larger portfolios.

“The increased use of limited company status is further evidence of how the buy-to-let market is changing and demonstrates how brokers and their clients need expert specialist support when buying as a limited company or considering switching.”

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