A record number of landlords are forming buy-to-let companies in a bid to secure more favourable tax conditions, according to a report from estate agent Hamptons. The surge comes as property investors seek to make their rental businesses more profitable by leveraging the tax advantages of limited companies.
One of the key drivers behind this trend is the exemption of properties sold by companies from Capital Gains Tax (CGT), a tax currently at the centre of speculation. There are growing concerns that Chancellor Rachel Reeves may announce a CGT increase in the upcoming Budget.
Majority of Purchases Now in Companies
The increasing number of limited companies set up to hold buy-to-let properties has resulted in a significant shift in how landlords are acquiring new properties. This year, 70% of new buy-to-let purchases in England and Wales have been made through limited companies, while only 30% were bought in individual names.
In September alone, 5,312 new companies were established across Great Britain to hold rental properties, contributing to what is expected to be a record-breaking year. Hamptons predicts that by the end of 2024, between 60,000 and 62,000 limited companies will have been created, surpassing last year’s total of 50,004.
Southern England Leads the Trend
Nearly 60% of the newly-formed buy-to-let companies are based in the South of England, highlighting a regional concentration in this growing trend.
Aneisha Beveridge, Head of Research at Hamptons, noted that most new purchases are now being made through company structures. “There’s also been a significant rise in the number of landlords transferring properties they own personally into company structures to mitigate the effects of an increasingly aggressive tax environment,” Beveridge added.
As landlords continue to face rising tax pressures, the formation of buy-to-let companies appears to be an attractive option for those looking to safeguard their investments.