Could specialist lending have the solution for limited company landlords?

By Liza Campion, Head of Corporate Accounts, Kent Reliance for Intermediaries

It’s hardy surprising that the pandemic has had a major impact on the rental market over the past 12 months or so – as the number of cases of coronavirus went up, the number of rental properties sold went down. The same can be said for the number of landlords selling properties too.

According to estate agent Hamptons1, just 131,000 rental properties were sold in Great Britain in 2020, the fewest number since 2013.

However, while there’s no doubt this can be partly attributed to the housing market grinding to a virtual standstill in the early days of the first lockdown, this only tells half the story.

Look a little deeper into the research and you’ll find the number of properties sold by landlords peaked in 2016. That’s the year after it was announced that mortgage interest tax relief would begin to be phased out, before finally being limited to the basic rate of income tax in the 2020/2021 tax year.

The result of introducing the removal of tax relief has led to an exodus of casual landlords from the sector. In other words, those landlords who were most likely to sell up have already sold up, hence the slowdown in sales of rental properties.

Those who remain are the professional landlords, the ones who are in it for the long-term, who perhaps do it as a full-time job and who are less likely to divest properties and may be actively looking to add to their portfolios.

This shift in landlord demographics has produced its own reaction – the growth in the number of landlords operating as a limited company.

Could limited company be the solution?

It’s no secret there’s been a big increase in landlords who are using limited companies to run their buy to let businesses or who intend to use a limited company structure to buy their next investment property.

The latest research by BVA BDRC2 shows that 18% of landlords now hold at least one property within a limited company. The research also shows that the typical number of properties held within a limited company has risen to 9.4 properties in Q1 2021 from 6.3 properties in the same period in 2020.

There are a number of reasons why landlords decide to incorporate. Limited company landlords can still offset mortgage interest against profits which, if they’re under £50,000, are only subject to Corporation Tax of 19% instead of income tax rates. Furthermore, interest coverage ratios on limited company applications are often lower than for most individual applications.

Plus, the stamp duty holiday pushed the number of buy to let landlords setting up limited companies to a record high in 2020, with an estimated 41,700 new buy to let limited companies were formed in 2020 – a 23% increase on the number established the year before3.

The reason being that limited company set ups could potentially be used by landlords to reduce the cost of moving new properties into an existing or new company structure.

It seems there are many reasons as to why limited companies could support buy to let landlords in today’s market.

And whilst we’re unable to give tax advice, if you’ve got a limited company customer who’s looking to add to their portfolio, or one who’s thinking of purchasing their next property in a limited company structure, a specialist lender like Kent Reliance for Intermediaries could have the products they need.

Click here to read more about the support available for your limited company customers.

Find out more

1 Lettings Index – March 2021.pdf/

2 BVA BDRC Landlords Panel Report Q1 2021 (slides 61 and 62)