A record 74% of landlords who intend to buy a rental property in the next year will do so using a limited company, data from Paragon Bank shows.  

This figure jumps from 62% of landlords who said they planned to use this structure in the first three months of the year, according to the lender’s quarterly survey.  

Buy-to-let homes bought via a limited company structure offer several tax benefits, such as the ability to deduct mortgage interest from company income and pay tax at corporation tax rates, rather than an individual landlord’s personal income tax rate.  

Also, most lenders set interest coverage ratios at 145% for higher-rate taxpayers, Paragon points out, whereas limited company applications require a ratio of 125%.   

Limited company landlords can typically secure higher loan amounts, which the bank says has further driven the adoption of this structure.  

The report adds that conversely, landlords planning to buy in an individual name have fallen from 41%, recorded in the final quarter of 2021, to 17% in the second quarter of this year.  

The survey points out that the average portfolio size of landlords with at least one property in a limited company, as well as the average number of properties held in a limited company structure within those portfolios, have increased since the final quarter of 2021, “suggesting portfolio landlords remain active purchasers of property”.  

It says that the average portfolio size for landlords in the second quarter of this year was 16.9, up from 15.6 in the previous three months and 13.1 in the final quarter of 2021.   

For landlords with homes held in limited companies, the average number of properties they held was 12.3 in the second quarter of this year, up from 11.7 compared to the previous three months and 7.8 in the final quarter of 2021.  

Paragon Bank commercial director of mortgages Louisa Sedgwick says: “Holding rental property within a limited company structure has been growing in popularity since the mortgage interest relief changes introduced by the government in 2017, but it has certainly accelerated in the past year.  

“As a lender that specialises in portfolio landlords, we have always attracted a higher proportion of limited company lending, but that has certainly increased, particularly as interest rates, and subsequently mortgage pricing, have risen.”  

Paragon Bank’s research was conducted by data group BVA BDRC, which surveyed 983 landlords between 1 July and 21 July.