Limited company BTL choice doubles as rates fall ahead of Budget speculation

PRS landlords are benefiting from a wider choice of limited company buy to let products and falling rates, research reveals.

According to the latest figures from Moneyfactscompare.co.uk, the rise in mortgage options comes as speculation grows that the next Budget could bring new tax measures targeting rental profits.

The number of fixed-rate BTL products available to limited companies has more than doubled in the past two years.

There are now 1,730 deals, compared with just 841 in October 2023. Of these, 776 are two-year fixes and 954 are five-year fixes.

Average rates have also dropped sharply as a typical two-year fixed rate for a limited company buy to let is now 5.04%, down from 6.53% a year ago and 5.54% in October 2023.

Limited company BTL deals grow

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “Landlords weighing up their options to reduce costs may be pleased to see the choice of limited company buy to let deals has grown.

“The growth should be welcomed in a market that is consistently facing external pressures, but the rumour mill churn in the run-up to the Budget could be causing concern.”

She added that potential new taxes could further drive the shift toward limited company structures.

Ms Springall explains: “One of the most worrying rumours circulating over recent weeks is the idea to levy National Insurance Contributions (NICs) on pre-mortgage profits.

“Unlike other reforms that gradually hit landlords, this could become a significant move to lead more landlords into setting up a limited company for their buy to let property portfolio.”

Professional investors remain dominant

Ms Springall notes that many landlords have already made the switch following the phased removal of mortgage interest tax relief between 2017 and 2020.

She said: “It is essential landlords seek independent advice to ensure they are as prepared as possible for any fundamental changes that may be announced in the coming months.”

She also highlighted that despite recent challenges, professional investors remain dominant, saying: “The buy to let market is still booming, and a recent study from Fleet revealed portfolio landlords are prominent, with around 61% of applications coming from those who hold four or more properties.”

Limited company costs fall

Falling borrowing costs are helping too and Ms Springall said: “Landlords may find it encouraging to see the cost of using a limited company buy to let has fallen over the past two years, thanks to falls to the Bank of England Base Rate and lower swap rates.”

However, she warns that profitability pressures persist: “The past few years have been challenging for landlords due to inflationary pressures, but that does not necessarily mean that these rising costs have been directly passed onto tenants.

“Rental growth has now lagged behind inflation (CPI) for nine consecutive months, according to Hamptons.

“Wider economic pressures continue to impact the rental market, so there is a careful balancing act for landlords to both meet their desired profit margin, while also ensuring they charge their tenants fairly.”

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