Thousands of BTL firms close each year, agency analysis shows

While the number of companies set up by individual landlords to hold buy to lets reached a record high last year, so too did the number of such firms that closed their doors for good.

An analysis by Connells-owned lettings agency Hamptons shows that no fewer than 15,200 buy to let companies closed in 2021 - that’s around six per cent of the total.

Since the start of the pandemic almost two years ago, some 25,100 such firms have closed for good.

The average lifespan for a buy to let company was just 5.8 years says Hamptons - a figure which has fallen steadily in recent years as the number of incorporations has increased.

The information comes in an analysis of BTL incorporations made by the agency.

Hamptons says that in total there were 47,400 new BTL companies incorporated in 2021 across the UK according to Companies House data.

This is nearly twice the number that were set up in 2017 when it was announced that investors with properties in their personal names would no longer be able to claim mortgage interest as an expense.  

While individual landlords are effectively taxed on turnover, company landlords are taxed on profit.  This has meant that for some landlords – particularly those who are higher rate taxpayers – it has become more profitable to move their buy to lets into a company.

However, the rate of growth in new incorporations fell compared to previous years, with a 14 per cent increase recorded between 2020 and 2021, down from a 30 per cent increase recorded between 2019 and 2020.

While the number of BTL companies up and running in the UK passed through the 200,000 mark as the country emerged from the first lockdown, by 2021 this figure rose to a new total of 269,300.  

Some 61 per cent of these have been set up since the withdrawal of mortgage interest relief which began in April 2017.

Aneisha Beveridge, head of research at Hamptons, says: “The way buy to let investors hold property has changed, with the impact of the tax changes made five years ago still shaping landlord buying behaviour today.  

“But despite record numbers of rental homes being held in companies, the growth in BTL businesses has come from smaller landlords rather than larger institutions who made up most buy to let company owners pre-2016.  

“Today, only 20 per cent of BTL businesses hold more than three mortgaged properties, a similar profile to landlords who hold homes in their personal name.”