Rising numbers of UK and international landlords are choosing to register as a limited company to manage their portfolios and to take advantage of sizeable tax benefits.
Thirlmere Deacon has seen a spike in international investors enquiring about forming a limited company, up 62 per cent year on year. It claims that further findings reveal that there were a record number of new limited companies set up in 2020, with 228,743 buy-to-let firms up and running.
Last year, there were a total of 41,700 buy-to-let incorporations, an increase of 23 per cent on 2019. The numbers have more than doubled since 2016, rising 128 per cent, when tax changes for landlords were introduced. Between the beginning of 2016 and the end of 2020 more companies were set up to hold buy-to-let properties than in the preceding 50 years combined. Companies set up to hold buy-to-let properties were the second most common company founded during 2020, with companies selling goods online or by mail order in first place.
More than a third (34 per cent) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47 per cent) of all incorporations.
Stuart Williams, founder and CEO of Thirlmere Deacon, said: “If landlords hold property in a limited company, they have the ability to offset 100 per cent of mortgage interest against profits, while those holding a property in their own name can offset just 20 per cent. Investing in property through a company provides landlords with higher levels of tax relief and personal tax savings. Landlords can grow their BTL portfolio more quickly, as there is no income tax on the retained profit, thus allowing more cash to re-invest. Although corporation tax is payable on trading profits, this is lower than the higher income tax rate.”
He added: “However, running a portfolio through a limited company is not right for everyone. One of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket. Profits can be used then for anything they choose – all paid for by the tenants.”
Source: Property Wire