Insight and events

It’s hardy surprisingly that the pandemic has had a major impact on the rental market over the past 12 months or so – as the number of cases of coronavirus went up, the number of rental properties sold went down. The same can be said for the number of landlords selling properties too.

According to estate agent Hamptons¹, just 131,000 rental properties were sold in Great Britain in 2020, the fewest number since 2013.

However, while there’s no doubt this can be partly attributed to the housing market grinding to a virtual standstill in the early days of the first lockdown, this only tells half the story.

Look a little deeper into the research and you’ll find the number of properties sold by landlords peaked in 2016. That’s the year after it was announced that mortgage interest tax relief would begin to be phased out, before finally being limited to the basic rate of income tax in the 2020/2021 tax year.

The result of introducing the removal of tax relief has led to an exodus of casual landlords from the sector. In other words, those landlords who were most likely to sell up have already sold up, hence the slowdown in sales of rental properties.

Those who remain are the professional landlords, the ones who are in it for the long-term, who perhaps do it as a full-time job and who are less likely to divest properties and may be actively looking to add to their portfolios.

This shift in landlord demographics has produced its own reaction – the growth in the number of landlords operating as a limited company.

Could limited company be the solution?

It’s no secret there’s been a big increase in landlords who are using limited companies to run their buy to let businesses or who intend to use a limited company structure to buy their next investment property.

The latest research by BVA BDRC² shows that 18% of landlords now hold at least one property within a limited company. The research also shows that the typical number of properties held within a limited company has risen to 9.4 properties in Q1 2021 from 6.3 properties in the same period in 2020.

There are a number of reasons why landlords decide to incorporate. Limited company landlords can still offset mortgage interest against profits which, if they’re under £50,000, are only subject to Corporation Tax of 19% instead of income tax rates. Furthermore, interest coverage ratios on limited company applications are often lower than for most individual applications.

Plus, the stamp duty holiday pushed the number of buy to let landlords setting up limited companies to a record high in 2020, with an estimated 41,700 new buy to let limited companies were formed in 2020 – a 23% increase on the number established the year before³.

The reason being that limited company set ups could potentially be used by landlords to reduce the cost of moving new properties into an existing or new company structure.

It seems there are many reasons as to why limited companies could support buy to let landlords in today’s market.

And whilst we’re unable to give tax advice, if you’ve got a limited company customer who’s looking to add to their portfolio, or one who’s thinking of purchasing their next property in a limited company structure, a specialist lender like Kent Reliance for Intermediaries could have the products they need.

How we could support you

We understand how challenging these cases can sometimes be and have a range of mortgages and criteria specifically designed with limited company landlords in mind. We’ve made our process as straightforward as possible and you’ll receive support every step of the way.

Our range of buy to let products, combined with our common sense approach to lending, means we’re well placed to support brokers with their cases. Our willingness to lend, flexible criteria and award-winning service means we can consider more challenging cases, however straightforward or complex they may be.

To ensure we’re providing brokers with the resources and support they need, we’ve put together a list of limited company FAQs. Covering everything from our solicitor panel to our fee structures and even questions about incorporation, we want to provide brokers with essential, need-to-know information when helping customers with limited company cases.

Get in touch

Buy to let has undergone significant changes in recent times and the continuing growth in the number of limited company landlords means it will continue to evolve in the coming years.

If you need help in reacting to the changing face of the market, don’t forget there are lenders here who are always ready to support you and your customers.

It you’re interested to know how else Kent Reliance for Intermediaries can help you support your limited company clients, get in touch.

Our national team of business development managers also have the knowledge and experience to deal with cases that aren’t always straightforward. They’re more than happy to work with brokers to find solutions where others may struggle.

Start a conversation with your business development manager today, or call us on 01634 888276 for more information about our products and services.

We also have a broker liaison team, who are available via Live Chat on our website to answer any case queries you have. 

Sources:

¹ https://www.hamptons.co.uk/research/pr/2021/Hamptons Lettings Index - March 2021.pdf/

² BVA BDRC Landlords Panel Report Q1 2021 (slides 61 and 62)

³ www.hamptons.co.uk/research/articles/2102-record-number-of-buy-to-let-incorporations/