Rush to register companies by landlords facing mortgage crisis

A RECORD number of landlords have set up companies to shelter their buy-to-let portfolios from soaring mortgage costs.

More than 50,000 were registered last year, surpassing the previous record of 48,502 in 2022. There are now more than 345,000 active limited companies designed to hold buy-to-let property in Britain, up by 11pc compared with this time last year.

Moving to an incorporated business model allows landlords to offset their mortgage interest costs against income tax and tax on gains is lower than capital gains tax.

Aneisha Beveridge, of Hamptons, said rising interest rates had pushed more landlords towards moving to a more formal corporate structure. The average two-year fix on a buy-to-let residential mortgage is now 5.78pc, according to analysts at Moneyfacts.

“For as long as landlords continue rolling off cheap fixed-term mortgages onto rates which are twice or triple what they are paying, the number of homes being put into a corporate structure will remain high,” she said.

“The number of buy-to-let incorporates each year is likely to continue running in the region of 40,000 to 50,000 for the foreseeable future.”

Ms Beveridge added that over the long term half of all rental homes could end up within a limited company.

Such companies now own 615,077 properties in Britain, up more than 82pc since the end of 2016, according to the estate agent’s analysis. The tax law changed then to make limited companies a more profitable way to hold buy-to-let properties for tens of thousands of landlords. The average rent on a newly let property rose by a tenth in December, marking the highest level of end-of-year annual growth since Hamptons’ records began in 2014 and the ninth consecutive month rents have risen faster than inflation.

Tenants in the East of England faced the steepest increases, where the average rent for a new property hit £1,299 per calendar month in December, a 13pc increase compared with a year ago.

Rents in London, the Midlands and the North of England also recorded double-digit growth.

However, a report by Savills last month found that landlord profitability has fallen to lower than 4pc of gross rent, levels not seen since 2007. Between 2014 and 2021, landlords were enjoying average profits of 23pc.