Paragon Bank has revealed that the proportion of landlords who plan to purchase their next buy-to-let property through a limited company has hit the highest level for three years.
An uplift from 50% in the first quarter of the year to 62% in Q2 2022 has led to a three-year high in the proportion of buy-to-let investors who intend to purchase their next property utilising a limited company structure.
This is according to research undertaken on behalf of Paragon Bank which highlights how the propensity to incorporate tends to increase with portfolio size. 47% of landlords who own between one and five properties expect their next purchase to be through a limited company, rising to 78% amongst those with portfolios consisting of six or more buy-to-let homes.
The survey of over 700 landlords, undertaken by BVA BDRC, found in the next 12 months, 14% of landlords plan to purchase buy-to-let properties.
Of those who intend to expand their portfolios, 66% said that they plan to finance their next property investment through a buy-to-let mortgage, following an increase of four percentage points since the previous quarter. There has also been an increase in the proportion of landlords who plan to fund purchases by releasing equity from existing properties, up from 17% in Q1 2022 to 28% in Q2 2022. Conversely, purchasing outright using previously invest funds has decreased in popularity amongst those planning to buy, falling from 14% to 7% during the same period.
Richard Rowntree, mortgages managing director for Paragon Bank, said: “Since midway through the last decade, tax burdens on buy-to-let investment have increased significantly. Along with the recent rise in overheads bought about by increasing energy and maintenance costs, running a letting business has undoubtably become more costly. It is unsurprising to see more landlords look for ways to reduce their costs, with incorporation being one option for some.
“Of course, purchasing buy-to-let property through a limited company may not be the best route for all landlords so it is important that we provide customers with the complete picture to enable them to make informed decisions.”
