Taxation Of Property Income

Massive Surge In Landlords Opting For Ltd Status

Nearly a quarter more of landlords (23%) have opted to become a limited company to ‘evade’ the tax increases levied on the private rented sector.

Official data reveals a huge surge in activity of landlords applying for limited company status as the mortgage interest relief has been and will be reduced year on year.

Large numbers of landlords are doing so to avoid having to pay the government’s ever increasing punishing taxes for when its Section 24’s tax changes are forced upon the sector.

The research was collated by a property investment firm which studied official statistics and shows that 41,700 new BTL limited companies last year were incorporated.

This is an increase of 23% of BTL companies from 2019 taking the number to 228,743.

These numbers are more than twice as many new BTL companies set up since 2016 when the government’s punitive taxing regulations first began to sink its teeth. In the last four years more landlord companies were set up than during the previous 50 years.

Just over a third of new companies in the private rented sector were set up in London and when coupled with the South East accounts for 47% of all incorporations.

BTL landlords as a company are able to offset 100% of their mortgage interest against profits, whilst landlords who have not can only offset just 20%.

Using a company, landlords are able to acquire new properties much quicker as there are no income tax levies on any retained profit which gives them far more purchasing power to increase their portfolios, plus corporation tax is only payable on trading profits at a far lower rate than the standard income tax charges.

CEO Stuart Williams of the property investment firm says: “Running a portfolio through a limited company is not right for everyone. But one of the main benefits of remaining a private landlord is that any post-tax profits can go straight into their pocket.”

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