New report also reveals the major barriers to incorporation
One in three landlords who own rental property in their personal name intend to incorporate their portfolio into a limited company structure, new research from buy-to-let lender Paragon Bank has revealed.
Its report, ‘The rise of the limited company landlord’, found that 33% of those with rental property in their personal name plan to incorporate within the next three years, although 37% said it was unlikely that they would transfer their properties into a limited company structure.
The main barrier to incorporation was tax, cited by 56%, followed by a lack of information on how to incorporate at 36%, and fewer mortgage options available at 26%.
Paragon’s report, based on a survey of over 1,000 landlords, found that nearly a quarter of landlords, or 23%, own all of their rental properties within a limited company structure. Around 31% hold a mix of personal name and limited company properties, while 34% hold all properties in personal name.
The lender has also noted a shift in the structure of property ownership from when landlords acquired their first rental property, with 71% of landlords initially holding property in their personal names.
This, according to Paragon, suggests that those landlords have shifted towards the limited company option as they have built their portfolios, either through incorporation or acquiring new property in a limited company structure.
“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,” commented Richard Rowntree (pictured), managing director of mortgages at Paragon Bank.
“Many landlords who own property exclusively within a limited company structure have done so from the off and that is reflected in the demographic of this group, which is typically younger than those with personal name or mixed portfolios.”
Rowntree added that there is a clear desire for a large proportion of landlords with property in personal names to incorporate, but barriers persist, such as having to pay Stamp Duty and Capital Gains Tax.
“We would advise landlords in this position to speak to a tax specialist who can offer guidance on the most suitable route available,” he said.
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