The number of limited companies set up to hold buy-to-let property investments has exceeded 400,000, making it the most prevalent type of small business registered. The latest lettings index released by Hamptons has revealed another increase in the number of buy-to-let landlords establishing a limited company through which to manage their rental properties. Previously, this was mainly a strategy used by larger portfolio landlords, but increasingly, smaller landlords are also choosing to operate in this way to benefit from certain tax advantages that can enhance the profitability of their buy-to-lets. According to Hamptons, Companies House now has more registered buy-to-let companies than any other type of business, with almost four times as many landlords setting up companies as there are fast food takeaways or hairdressers, according to the latest data from February. This marks a rise of approximately 332% over the past nine years in the number of buy-to-let limited companies, with the total reaching 401,744 last month.
Dominant Locations
As London is home to the highest number of landlords in the country, it also has the largest share of limited company buy-to-lets. Companies House and Hamptons data show that there are now 122,269 such companies registered in the capital, representing a 30% share of all rental properties. The South East follows with 50,453 companies registered for buy-to-lets (a 13% share), while the North West, a region that has seen significant growth in interest from property investors in recent years, has 40,184 buy-to-let companies registered (a 10% share). The region with the least popularity for limited company set-ups is Northern Ireland, where just 5,036 buy-to-let limited companies are registered (a 1% share).
According to Hamptons, this location-based pattern is largely due to the balance of yields versus property prices and their impact on tax considerations. For example, lower yields and very high purchase prices in London make the ability to offset mortgage interest particularly important. Additionally, many landlords in the North West may be established property investors with properties across the country, including the capital, making it more tax-efficient to operate their buy-to-lets in that region through a limited company.
Limited Companies Indicate Long-Term Investment
There has been discussion in the media about the decline of the ‘accidental landlord’, a term used for those letting out properties by circumstance, such as those who have inherited a property. With tax changes and higher interest rates making the buy-to-let market less attractive for such landlords, it appears that more serious ‘business landlords’ and professional investors are moving into the sector, as evidenced by the rise in limited companies for buy-to-let. The report notes: “Despite the challenges facing the private rental sector, the rise of buy-to-let transfers into companies also suggests that these investors are committed to the long-term. Given the costs associated with setting up a limited company and transferring a portfolio into that structure, these investors are unlikely to be planning to sell any time soon.” Some of the most notable benefits that attract people to own rental properties through a limited company, rather than as an individual, are related to tax advantages. This shift began when mortgage interest relief was phased out starting in 2016, which primarily affected higher-rate taxpayers. Properties owned through limited companies are treated differently from a tax perspective, allowing companies to deduct mortgage interest as a business expense before tax, while individuals are not able to do so. Hamptons adds: “The limited company structure is now the preferred choice for the next generation of investors as well. We estimate that 70-75% of new buy-to-let purchases are now placed into a company structure, a figure that has been steadily increasing.” Higher interest rates are believed to have further intensified this move towards limited companies for buy-to-let, as landlords seek ways to maintain the profitability of their investments. According to the data, a record 61,517 new limited company structures were set up for buy-to-let investments in 2024, marking a significant 23% increase from the previous year. This brings the total number of buy-to-let companies to 680,000 in England and Wales.
