Despite a decrease in overall landlord purchases since pre-pandemic levels, the formation of limited companies to own rental properties continues at a remarkable pace.
Analysis of Companies House data from Hamptons shows that in September 2024 alone, 5,312 new limited companies were set up across Great Britain to hold buy-to-let properties. The data indicates that this figure is 28% higher than in September 2023 and represents the third-highest monthly figure on record, trailing only April 2024, with 5,854 new companies, and February 2024, with 5,442.
The surge in incorporations is suggested to have set a record for the first three quarters of 2024, with 46,449 companies formed between January and September, marking a 23% increase over the same period in 2023, an already record-breaking year for incorporations. This means that the current year to date has seen more companies established than throughout all of 2021.
This shift is also evident in the latest Pegasus Insight Landlord Trends research report for Q3 2024 which outlines that the share of rental properties held within company structures has jumped from 36% in Q1 2020 to 76% in Q3 2024. This change is largely driven by landlords incorporating at the time of purchase, signalling a fundamental shift in the buy-to-let (BTL) landscape.
Incorporation offers key benefits for landlords aiming to expand and manage larger portfolios. Currently, a significant proportion of newly purchased rental properties by limited company landlords are placed directly into business structures. This shift highlights a growing preference for the flexibility and tax efficiency of limited companies, particularly appealing to landlords with substantial portfolios. The Landlord Trends research also shows that while most landlords (79%) still hold all their properties individually, 21% now have at least one property within a limited company structure, with 9% managing their entire portfolio this way. These landlords, who typically own an average of 13.1 properties, tend to be more leveraged and investment oriented.
For intermediaries, understanding this rising trend offers a prime opportunity to better guide those landlords who are exploring their limited company options, while providing tailored mortgage solutions to support growth and investment strategies.
