Landlord company registrations rise as many seek to avoid higher tax bills

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Higher taxes and the pandemic have significantly increased the number of landlords starting up limited companies rather than owning and operating properties personally, new research shows.

While some 15,800 landlord companies were launched in 2019, last year that figure was 28,130.

The study, which used Companies House listings and was commissioned by Easy Offices, also shows a significant increase in the number of younger landlords entering the fray via limited companies (107 in 2019 versus 1,178 last year) although the largest group are the over 50s who made up some 40% of last year’s total.

Younger landlords also tend to be urban and concentrated in London, Manchester, Birmingham, Leeds and Leicester. Easy Offices says these findings within the property sector are in line with wider research which suggests the pandemic was a catalyst for young people starting their own businesses.

A 2022 study that looked at some 2.3 million UK businesses across many industries showed the percentage of start-up owners aged under 35 had more than doubled since March 2020, rising from 16.4% to 34%. A similar study found that 11% of BTL properties are now owned through a corporate structure.

But unlike other industries, the jump in the number of limited companies has also been driven by HMRC’s changes to landlord tax via the ‘Section 24’ rules that saw tax relief on mortgage interest payments dramatically reduced for those owning properties personally.

The only way to avoid this punitive ‘tax on income rather than profits’ as it is called is to transfer BTL businesses to a limited company or, as these figures show, when starting up using such structures from the outset.

Bold steps

“This spike of new businesses following the pandemic shows how it drove a large number of people to take bold steps,” says John Williams (pictured), Chief Marketing Officer at Easy Offices.

“We have seen the number of sole traders and small businesses looking for office space leap year on year.

“This trend is based on a lot of more experienced workers leaving behind their white collar jobs with blue chip companies and looking to start their own ventures after the pandemic.

“It is the rise of the midlife entrepreneur, similar to that we saw in the aftermath of the Global Financial Crisis in 2008.”

Landlord firms as defined by Companies House are those who owners identify them as ‘letting and operating own or leased real estate’.

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