A report released by Paragon Bank reveals that a significant number of landlords with rental properties held in their personal names are considering the transition to a limited company structure. The report, titled “The Rise of the Limited Company Landlord,” highlights the growing trend in the property market, with a focus on tax implications.
According to the study, 33% of landlords who currently own rental property in their personal name have expressed intentions to convert their portfolio into a limited company structure within the next three years. However, it is worth noting that 37% of those surveyed stated it was unlikely that they would take this step.
The primary obstacle cited by landlords against incorporation was tax-related, with 56% expressing concerns in this regard. Additionally, 36% indicated a lack of information on how to incorporate as a significant hurdle, while 26% were worried about having fewer mortgage options available to limited companies.
Paragon Bank’s report, based on a survey of over 1,000 landlords, revealed that the property ownership landscape has evolved significantly since their initial acquisitions. Currently, 23% of landlords own all their rental properties within a limited company structure, 31% maintain a mix of properties in their personal name and within a limited company, and 34% continue to hold all their properties in their personal name.
This shift in property ownership structure indicates a growing preference for limited companies among landlords as they build their property portfolios, either through incorporating existing properties or acquiring new ones within a limited company framework.
Richard Rowntree, Managing Director of Mortgages at Paragon Bank, comments on this trend, saying, “There has been a significant increase in the number of landlords who hold property in a limited company structure over the past six years, as the Government started to phase out Mortgage Interest Relief from 2017. Many landlords who own property exclusively within a limited company structure have done so from the beginning, and that is reflected in the demographic of this group, which is typically younger than those with personal name or mixed portfolios.”
Rowntree also emphasizes that despite the desire of a large proportion of landlords to incorporate, various barriers persist, such as Stamp Duty and Capital Gains Tax. He advises landlords in this position to consult with tax specialists who can offer guidance on the most suitable path forward. The report sheds light on the evolving landscape of property ownership in the UK, influenced by changing tax policies and financial considerations for landlords.