41% of landlords looking to switch to limited companies


Some 41 per cent of landlords are considering moving their portfolios into corporate structures, according to new research.

The survey of 1,400 landlords, conducted by BDRC Continental on behalf of Paragon Mortgages, shows a further 5 per cent have already established limited companies following the Chancellor’s decision to reduce tax relief from April 2017.

For larger landlords with 20 or more properties, 14 per cent are already operating as limited companies while 63 per cent are considering it, the survey shows.

As well as a reduction in tax relief, the Chancellor has also introduced a 3-percentage point surcharge on buy-to-let transactions, which came into effect today.

Forty three per cent of those surveyed agreed that the increased stamp duty rates would affect their buy-to-let purchasing plans over the next couple of years. This rises to 63 per cent for landlords with 20 or more properties.

Despite the tax changes, tenant demand among landlords is perceived to be high, says Paragon, and average yields have held steady at 5.6 per cent.

Paragon director of mortgages John Heron says: “Recent government interventions into the buy-to-let market are now beginning to impact landlord sentiment and plans. The fundamental drivers of the market however – tenant demand and yields – remain strong so there are competing dynamics at play.

“It is interesting to see that concern about the impact of changes to stamp-duty and tax relief is greatest among larger landlords. This concern is likely to grow now that the Government have confirmed that landlords with larger portfolios will have to pay the increased rate of stamp duty on buy-to-let purchases.”