Buy-to-let landlords are increasingly shifting to limited company structures to hold their property portfolios. According to data from Companies House, the number of companies set up to hold buy-to-let property in the UK has surged by 332% over the past nine years, reaching a milestone of 401,744 in February 2025.
Companies House now has more registered buy-to-let companies than any other type of business. There are nearly four times as many buy-to-let companies operating than either fast food takeaways or hairdressers.
This shift can be largely attributed to changes in tax legislation introduced in 2016, which began phasing out full mortgage interest tax relief for higher-rate taxpayers. These changes have reshaped how landlords approach their investments and manage their tax liabilities, with investors increasingly shifting their portfolios into a limited company structure.
The limited company is now the structure of choice for the next generation of investors too. We estimate that 70-75% of new buy-to-let purchases now go into a company structure, a figure that has been steadily growing.
Current tax rules mean that most, although not all, new investors find themselves better off in a company structure than owning an investment property in their own name. Under the current system, companies can still deduct mortgage interest as a business expense before calculating their tax liability. This contrasts sharply with the situation for individual landlords, who since 2020 have been restricted to a 20% tax credit on mortgage interest payments.
For example, a higher-rate taxpaying landlord receiving £1,000 per month in rent while paying £500 per month in mortgage interest would have paid £2,400 in tax on their £6,000 profit back in 2015. By 2020, under the new rules, the same landlord would pay £3,600 in tax - a 50% increase.
As interest rates have risen, the impact of this policy change has become even more pronounced. In 2024 alone, a record 61,517 new limited companies were set up for buy-to-let purposes, marking a 23% increase from the previous year, which was an all-time high.
There are now around 680,000 properties held in limited company structures across England & Wales, with this number increasing by 70,000-100,000 annually. However, not all of these companies represent new entries to the rental market. Many existing landlords are transferring properties from personal ownership into limited companies.
The geographical distribution of these companies is telling. London, where lower yields make the ability to offset mortgage interest particularly crucial, is home to 30% of all buy-to-let companies. This concentration underscores the importance of tax considerations in high-value, low-yield markets.
Despite the backdrop for the private rental sector, the rise of buy-to-let transfers into companies also suggests that these investors are in it for the long-run. Given the costs associated with setting up a limited company and moving a portfolio into that structure, these investors are unlikely intending to sell up soon. Usually, stamp duty must be paid when the company purchases the property, and there might be a capital gains tax liability on the sale too.
While the trend towards incorporation is likely to continue, some factors could slow its pace. The recent increase in the stamp duty surcharge from 3% to 5% may deter some landlords from transferring existing properties into company structures. Additionally, falling mortgage rates could mean the benefit of incorporation for some investors is weakened.
You can read more about the pros and cons of incorporating property in a limited company in our blog here.
Rental growth
Over the 12 months to February 2025, the average cost of a newly agreed let in Great Britain rose by just 1.0%, the slowest rate since September 2020. This slowdown has been particularly pronounced in London, where newly agreed rents were down 2.8% year-on-year. These falls put the cost of moving into a new rental property in the capital back to May 2023 levels.
Newly agreed Inner London rents fell by 5.1% over the last 12 months, meaning they stand 9.4% below their peak last year. Tenants may increasingly find themselves better off moving home than renewing a contract for their existing home. Here, the average monthly cost of moving into a new home stood at £2,647pcm, 3.5% less than the cost faced by tenants renewing a contract with an existing landlord.
Nationally, while the cost of renewing a contract continued to rise faster than the cost of moving into a new property, tenants staying put still paid less. The average rent on contract renewal rose 5.6% over the last 12 months, meaning the average renewal rent is £93 pcm below the cost of moving into a new property.
