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Companies set up to hold buy to let rental properties were the second most common type of company founded during 2020, property sales and lettings agency Hamptons has reported. Companies selling goods online or by mail order were the most common.
In all, close to 42,000 new buy to let companies were set up in 2020, bringing the total to 229,000 – an all-time record, said Hampton.
Southern-based landlords have been most likely to incorporate their businesses. ‘Given the high cost of property, generally landlords based in the South are more likely to be mortgaged which means that in cash terms their mortgage interest bill is likely to be higher. Therefore the benefits of incorporating a buy-to-let portfolio into a company are likely to be bigger’.
More than a third of new buy to companies were based in London and London and the South East together accounted for almost half of all incorporations.
The tax benefits of holding property in a company derive from the ability of landlords to offset 100 per cent of mortgage interest against profits, said Hamptons.
‘But whilst those landlords holding their property in a company can offset more costs against their rental income, mortgage interest rates tend to be higher. This means that setting up a company to hold buy to let property tends to benefit higher income taxpayers, or those with multiple buy to let properties
- December was the first month since the onset of the pandemic that prospective tenant numbers surpassed 2019 levels, Hamptons’ latest Lettings Index has reported.
This coincides with a fall in the number of available rental homes. The result has been an increase in rents ‘to a point where rents are rising faster than house price growth in almost every region’.
Over the last three months, annual rental growth rose from 1.4 per cent in October to 3.0 per cent in November and to 4.1 per cent in December. ‘This is the fastest rate of rental growth recorded in more than four and a half years’, said Hamptons.
‘Once again, all nine regions in England saw rents rise during December, with rental growth also turning positive in Wales. Rents in London began to rise in November for the first time since the start of the pandemic, following eight months of falls. And December saw growth jump from 0.3 per cent to 1.6 per cent in the capital.
‘However, rents in Inner London remain well down on last year, falling 11.5 per cent between December 2019 and December 2020. This is a slightly smaller decrease than the 12.7 per cent year-on-year fall recorded in November’.