How have buy-to-let mortgage tax changes affected landlords?

Prediction 3: Landlords would transfer property ownership to limited companies

One way landlords can minimise the impact of the restriction of mortgage interest tax relief is to transfer ownership of their property to a limited company. As a result, it was predicted that there’d be a surge in the number of landlords starting buy-to-let companies.

Landlords who incorporate their portfolio pay corporation tax instead of income tax, meaning they don’t suffer from Section 24 restrictions and benefit from several other tax incentives.

Companies House data, analysed by Hamptons, shows a rising trend in incorporating buy-to-let companies in recent years:

There’s also been a surge in the number of buy-to-let mortgage products suitable for limited company landlords to reflect demand.

Further analysis from Hamptons shows that between the beginning of 2016 and the end of 2020, more companies were set up to hold buy-to-let properties than in the previous 50 years combined.

At the end of 2021, there were almost 270,000 buy-to-let companies in the UK, up from around 200,000 in mid-2020.

Verdict: While incorporation isn’t suitable for all landlords, it’s clear there’s been a significant shift to limited company ownership since the start of Section 24 changes. Read our guide to setting up a property company for more information on the pros and cons of this approach.