A third (33%) of landlords who own their rental company in their personal name are planning to incorporate their portfolio into a limited company structure, Paragon Bank has found.

In the bank’s new report, The rise of the limited company landlord, it was found that a third of landlords looking to make the switch would do so in the next three years. However, 37% said it was unlikely that they would transfer their properties to a limited company structure.

The report found that tax was the main barrier to incorporation, with 56% of those with property in personal name citing this as an issue. This was followed by a lack of information on how to incorporate (36%), with 26% stating that there are fewer mortgage options available.

The survey of over 1,000 landlords also revealed that nearly a quarter (23%) of landlords own all their rental properties within a limited company structure, with 31% holding a mix of personal name and limited company properties and 34% holding all properties in personal name.

Paragon Bank said there has been a clear shift in the structure of property ownership from when landlords acquired their first rental property, with 71% initially holding properties in their personal names, suggesting that they have pivoted towards the limited company option as they have built their portfolios.

Managing director of mortgages at Paragon Bank, Richard Rowntree, said: “There has been a significant increase in the number of landlords who hold property in a limited company structure over the past six years as the Government started to phase out mortgage interest relief from 2017.

“Many landlords who own property exclusively within a limited company structure have done so from the off and that is reflected in the demographic of this group, which is typically younger than those with personal name or mixed portfolios.”

The report also found that limited company ownership doesn’t necessarily translate to experience.

While 46% of those who own property exclusively within a limited company have more than 11 years’ experience, 33% only have up to five years’ experience. Conversely, 85% of landlords who own property in personal name have over 11 years’ experience.

Rowntree added: “There is a clear desire for a large proportion of landlords with property in personal names to incorporate, but barriers persist, such as having to pay stamp duty and capital gains tax. We would advise landlords in this position to speak to a tax specialist who can offer guidance on the most suitable route available.”

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