Should You Be Using A Limited Company As A Landlord/Property Investor?
Why 3 out of 4 Landlords Use Limited Companies For Their Properties
In recent years, limited companies have become increasingly popular among landlords in the United Kingdom. According to a recent survey, three out of four landlords now use limited companies for at least one of their properties, indicating that it is fast becoming the norm for new investors. Of these landlords, 49% invested via a limited company within the last year, while 42% invested for the first time in the past one to three years.
The use of limited companies among landlords has grown significantly following the removal of mortgage income tax relief for those operating as individuals by the UK government, which has been replaced with a tax credit. Many landlords have turned to limited companies in order to benefit from the limited personal liability that they offer, which can provide protection against the higher risk of missed rental payments in the current economic climate. Additionally, 57% of landlords use limited companies to enable co-investment among multiple individuals.
Despite the growing popularity of limited companies among landlords, they have yet to be fully adopted by most investors. According to the survey, 93% of landlords who use limited companies manage less than half their portfolio through such companies. This may be due in part to the fact that landlords who transfer ownership of a property from an individual to a limited company structure must pay stamp duty again, providing a strong incentive to leave certain properties as they are. However, 78% of landlords surveyed have still moved at least one investment property from personal ownership into a company structure after completion.
Overall, it appears that limited companies are becoming an increasingly popular choice among landlords in the UK, offering a range of benefits including limited personal liability, the ability to enable co-investment, and the potential for increased financial viability. As the current economic crisis continues, it is likely that the adoption of limited companies by landlords will continue to accelerate in the coming years.
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