In recent years, the buy-to-let (BTL) market has seen a surge in professionalisation, with more investors looking to incorporate their businesses as limited companies. This trend is set to continue as the sector continues to grow and evolve, with many investors recognising the benefits that incorporation can bring.
The main benefit of incorporating a BTL business is the potential for tax savings. By setting up a limited company, investors can take advantage of the corporation tax rate, which is currently 19%, compared to the higher income tax rate of up to 45%. This can result in significant savings for investors, particularly those with larger portfolios.
In addition to tax savings, limited company incorporation can also provide investors with greater flexibility when it comes to managing their BTL business. For example, limited companies can make use of a range of different structures, such as trusts and limited liability partnerships, which can help to protect the investor’s assets and minimise their tax liabilities.
Furthermore, limited companies can also provide investors with access to a wider range of financing options. For example, limited companies can access commercial mortgages, which are typically more competitively priced than residential mortgages. This can be particularly beneficial for larger BTL portfolios, as it can help to reduce the overall cost of borrowing.
Finally, limited company incorporation can also provide investors with greater protection from personal liability. As a limited company is a separate legal entity, any debts or liabilities incurred by the business will not be attributed to the individual investors. This can provide a degree of peace of mind for investors who are concerned about their personal financial security.
Overall, it is clear that limited company incorporation is set to become increasingly popular amongst BTL investors. With the potential for tax savings, greater flexibility and access to more competitive financing options, it is easy to see why so many investors are choosing to incorporate their businesses. As the sector continues to grow and evolve, it is likely that this trend will only continue in the future.