2024 saw a record number of new companies set up to hold buy-to-let property. Over 60,000 of such limited companies were set up last year, a 23% increase on what had been a record 2023. The number of new incorporations has risen every year for at least the last decade, with growth supercharged from 2018 onwards when the tax rules were rewritten for landlords owning mortgaged properties in their personal names. Across Great Britain, there are now over 390,000 buy-to-let companies up and running.
We estimate that 70-75% of new buy-to-let purchases now go into a company structure, a figure which has steadily grown alongside the increase in the number of companies set up to hold these properties. Between 30-40% of these purchases are held by companies which were set up within the last 12 months. Meanwhile, the remainder went into older companies, the vast majority of which already held at least one rental property.
However, it’s fairly unlikely that the share of investment properties going into a company will materially increase further, at least not without a re-writing of the tax rules. While the limited company structure can offer significant tax savings for some, there will always be a minority - mortgage-free, lower rate taxpayers in particular - for whom ownership in personal names is both more tax efficient and cost-effective.
In total, there are now around 680,000 properties held in a limited company structure across England & Wales, with the number rising by an average of 70,000-100,000 per year. While the pace of increase may slow as the impact of hiking the stamp duty surcharge from 3% to 5% bites, the vast majority of new purchases will still go into a limited company.
Most of these purchases remain local, reflecting how landlords have long tended to operate. But an increasing number of southern-based investors are investing in the Midlands and the North to get exposure to markets which have, in recent years, seen faster house price and rental growth. Last year, only around 14% of purchases in London were in the same postcode district as the company HQ.
Growth in the number of homes held in a company structure has come from a combination of both domestic and international buyers. GetGround, specialists in setting up and running limited companies to hold buy-to-let property, recorded a 35% increase in the number of companies set up by UK-based investors, alongside a 37% increase among those set up by non-UK investors.
Hong Kong and Singapore investors were the largest group of non-UK investors incorporating buy-to-let companies in 2024, the same story as in 2023. However, growth among these largest groups tended to be slow. Rather, the number of companies incorporated by residents from the Netherlands grew by 56%, faster than any other group. This Dutch driven growth was followed by US based investors whose numbers rose by 31%, the UAE by 28%, China by 20% and then Ireland and Singapore (both by 14%).
Increasing ownership of investment homes in a company structure has typically been driven by younger generations of landlords. GetGround report that around 60% of companies set up in 2024 were owned by shareholders under 45. In fact, the number of companies set up with shareholders between 16-25 doubled between 2023 and 2024. For context, the average landlord is 60, and someone taking out a new buy-to-let mortgage hit their mid-40s last year.
In the short term, 2024 may prove to be a high watermark for the number of companies set up to hold buy-to-let property. Higher stamp duty rates will be a big barrier to moving a rental home from personal names into a company structure, while also weighing down on the number of buy-to-let purchases overall. This is likely to suppress the number of companies being set up.
However, the limited company is now firmly the structure of choice for younger investors starting out their journey. And mortgage lenders are following, with increasing numbers jumping into the market, bearing down on rates that historically came with a significant premium attached. This may mean that in the medium term, as mortgage rates and returns on cash savings accounts drop back, the number of companies set up to hold buy-to-let companies will return to growth.
