A record 50,004 limited buy-to-let companies were set up last year, driven mostly by existing landlords looking to shelter themselves from higher interest rates.

Hamptons monthly letting index for December shows that Scotland recorded the largest increase, with an 8% year-on-year uplift – due to the bigger difference in tax rates paid by individual landlords and limited companies. A record 58% of limited company buy-to-lets in the North East were held in a company that was set up outside the region, reflecting how landlords from across the UK are targeting higher yielding buy-to-lets, particularly in the north of England.

Tax changes

As a result, there were 345,426 active limited companies designed to hold buy-to-let property in the UK, up 11% from 309,643 at the start of last year; 68% were set up between 2017 and 2023 when tax changes came in. These companies own 615,077 properties across England & Wales, an 82% increase from the end of 2016.

Most of the growth in buy-to-let incorporations over the last year has come from smaller landlords; there was a 21% increase in the number of homes held in companies with a single property compared with a 3% rise in the number held by companies owning 20+ homes.

Fixed-term

Aneisha Beveridge, Hamptons head of research, says for as long as landlords continue rolling off cheap fixed-term mortgages onto rates which are twice or triple what they were paying, the number of homes being put into a corporate structure will remain high.

She adds: “The number of buy-to-let incorporations each year is likely to continue running in the region of 40,000-50,000 for the foreseeable future. Longer term, the current tax regime could push half of all rental homes into a limited company, significantly reducing the existence of landlords who own buy-to-lets in their personal name.”