Landlords set up record number of professional companies to seek tax relief

According to figures from estate agency Hamptons, there were 6,493 new landlord company incorporations last month, bringing the total for 2025 so far to 51,295 — the busiest start to a year since records began 18 years ago.

Mortgage broker Howard Levy, from SPF Private Clients, said: “I am approached by two or three landlords every week about incorporating their portfolios. For landlords with more properties, doing this is usually a good idea because of the tax changes over the past few years.”

Holding rental properties through a company offers significant tax advantages. Unlike individual landlords, company owners can still fully deduct mortgage interest when calculating taxable profit, and also offset costs such as property repairs and replacement fixtures.

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Individual landlords, by contrast, pay income tax on their full rental income before claiming a limited 20% credit for interest.

Hamptons' Aneisha Beveridge said the surge was being driven by existing landlords converting their portfolios rather than new buyers entering the market.

“While new buy-to-let purchases haven’t exactly dropped off a cliff, they are running low,” she said.

Companies pay corporation tax at 25%, or 19% for those earning under £50,000, which is below the 40-45% income tax rates paid by higher and additional-rate earners.

Dividend payments are also taxed at lower rates — 8.75%, 33.75% or 39.35% depending on the taxpayer’s band — with a £500 annual tax-free allowance.

Levy added: "The savings that clients make are based on offsetting costs and mortgage interest against the rents so this can be hundreds of thousands of pounds for larger portfolios. It’s typically those with more properties that tend to benefit.

"Any costs can also often be added to mortgage lending so are not required to be paid at the outset."

The choice of limited company buy-to-let mortgages has more than doubled over the past year, with 1,730 two- and five-year fixed-rate products now available, up from 841 in October 2023, according to Moneyfacts.

Company landlords also face less strict affordability checks. For example, Nationwide requires individual higher-rate taxpayers to show that rent covers 160% of mortgage payments, but company landlords need only 125% coverage.

However, interest rates are higher. The average two-year fix for a limited company landlord is 5.04%, compared with 4.84% across all buy-to-let deals. The five-year fix stands at 5.5% versus 5.2%, meaning someone with a £200,000 interest-only mortgage would pay around £600 more per year.

Hina Bhudia of Knight Frank Finance said: “The mortgage rates and fees are often slightly higher. However, people tend to disregard those increased costs because of the overall tax saving.

”Incorporation comes with upfront costs. Transferring properties into a company typically incurs stamp duty, including the 5% surcharge on additional homes, and may trigger capital gains tax of up to 24%. Despite these hurdles, Beveridge said landlords choosing to incorporate are likely planning to hold on to their investments.

“Because of the costs involved it suggests that these investors are planning to stay in the market for the long run,” she said.

“If you were thinking of selling in a year or two, it probably wouldn’t make sense to incorporate.”