The Intermediary – May 2025 - Flipbook - Page 48
BUY-TO-LET
Opinion
12-year countdown:
The dominance of
limited companies
B
uy-to-let (BTL) lending
to landlords via limited
companies, once a
backwater of the UK
private rented sector
(PRS), is becoming
the dominant form of lending in the
sector. Our data predicts its almost
total dominance of BTL by 2037.
When Landbay began lending,
our first loans were all to individual
landlords – not a single limited
company. Nevertheless, we pride
ourselves on our ability to provide
diverse and competitive range, and
by 2018, about 55% of our total live
gross loan amount was via limited
company loans.
There are good reasons why
these loans weren’t flying off the
shelves 10 years ago when we were
founded. Seing up and running a
limited company involved additional
expenses, including accounting costs,
and annual filing requirements with
Companies House. The administrative
burden felt unnecessary for smallerscale landlords.
There was also limited availability.
Few lenders offered limited company
BTL mortgages. High street banks
focused on individual borrowers,
leaving limited company options
as niche products with specialist
lenders, oen with higher fees and
interest rates – 0.5% to 1.0% above
individual rates.
Even by Q1 2018, 57% of lenders
weren’t offering limited company
products at all, according to the
MFB BTL index. We weren’t alone in
focusing on lending to individuals.
Tax efficiency was also not a priority
at that time. Before 2016, individual
landlords could offset 100% of their
mortgage interest against rental
income for tax purposes, regardless of
their tax bracket.
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The Intermediary | May 2025
This made individual ownership
simpler and more cost-effective.
Finally, many landlords,
especially non-professionals with
small portfolios, were unaware of
the limited company option or its
potential benefits, viewing it as a tool
for large-scale investors or businesses.
All change
Then, in July 2015, George Osborne
announced the phased reduction of
mortgage interest tax relief in the
Summer Budget, effective from April
2017, with full implementation by
April 2020. This sparked interest in
limited company structures – it was
the single biggest catalyst for driving
incorporation, saving higher-rate
taxpayers thousands annually.
At 19%, Corporation Tax also
remained more favourable than
personal income tax rates – up to 45%.
And post-2017, Prudential Regulation
Authority (PRA) rules professionalised
the sector, making limited company
setups a logical fit for landlords
adapting to stricter affordability and
risk assessments.
Lenders evolved to meet demand.
Increased competition from 2017
onwards reduced limited company
mortgage rates and fees, closing the
cost gap with individual loans.
The popularity of limited company
loans is highlighted by new business
registrations. In 2024, a record
number of new companies were
set up to hold buy-to-let property.
According to Hamptons, more than
60,000 limited companies were set up
last year, a 23% increase on 2023. The
estate agent estimates that up to 75% of
new buy-to-let purchases now go into
a company structure.
In the first quarter of 2018, there
were 1,466 BTL products on the
market, according to the MFB BTL
ROB STANTON
is sales and distribution
director at Landbay
index. Only 367 of those were limited
company products, meaning 75%
of products were for individual
landlords. By Q2 2022, there were
1,320 limited company BTL products,
out of a total of 2,570 BTL products,
meaning fewer than 50% were for
individual landlords. By Q3 2019, only
37% of lenders weren’t offering limited
company products.
By 2022, only around 25% of our
total live gross loan amount was
to individual landlords. Landbay
still offers a range of fixed rate and
tracker products, but now just 15%
of our total live gross loan amount is
to individuals.
This means that, were the current
trend to continue unchanged,
loans to limited companies will
dominate the market within 12 years,
probably sooner.
While we still lend to individuals,
and we expect there will always be a
place for them in the market, by 2037,
the trend that changed this country’s
relationship with property – the
humble BTL mortgage to an individual
landlord – and revolutionised the
private rented sector, will be over.
Landbay’s journey mirrors a seismic
shi in the buy-to-let landscape, from
a market overshadowed by individual
landlords to one embracing limited
company structures.
Tax reforms, lender evolution,
and the professionalisation of the
sector all flipped the script, slashing
individual lending. The limited
company BTL loan is set to command
the market by 2037 – proof, if nothing
else, that the mortgage industry is as
agile as ever. ●
