Partners and Suppliers Dr Moubin Faizullah-Khan 23/06/2022

Limited Company Structure Offers Landlords Protection Against Inflation

There are few bigger concerns for people in the UK currently than inflation. The latest figures from the Office for National Statistics (ONS) show that inflation now sits at 9.1%, its highest point in four decades, with warnings that it is only likely to increase further.

It’s incredible that even after the difficulties of the last couple of years, there remain big challenges ahead in managing our money and our businesses.

At GetGround we work closely with landlords, and from our conversations with them it’s clear that they are just as preoccupied with guarding against inflation as the rest of us. And one of the ways landlords can protect themselves and their businesses against inflation, is through adopting a limited company structure. 

At GetGround, we recently polled landlords on how they could mitigate against rising prices, and the results were striking. 78% said they believed investing through limited companies, rather than in their own name, would help them mitigate against the impacts of inflation.

What’s more, a similar proportion agreed that limited company structures meant they could also adjust more easily to rising inflation.

Landlords turn to limited company structure

It’s encouraging to see real growth in the number of property investors going down the limited company route. Data from Hamptons shows that 2021 saw a record 47,400 new companies incorporated for the purpose of holding property.

Not only is that a new high, but it is also just shy of double the number of such firms registered back in 2017. This is an important date, since it was 2017 when changes to the way that property investments are taxed came into force, adding to the appeal of limited company investing.

Before then, landlords were able to class the interest paid on their mortgage as a business expense. While this is no longer possible for landlords who invest in their own name, it is an option ‒ and indeed one of the big benefits ‒ of investing through a limited company.

Limited company buy-to-let can come with other financial benefits too, such as more favourable tax rates given landlords pay corporation tax rather than income tax on the rental income. This can work out far more attractive than owning investment properties as an individual. It can also make it easier to expand the portfolio when the time is right.

Reduced operating and tax costs mean that landlords are able to retain a greater proportion of the rental income they enjoy, meaning they are better placed to absorb the rising costs we see on everything from energy to broadband bills.

Given all these factors, it’s unsurprising that a limited company structure is recognised as a useful defence mechanism against the impact of inflation. 

The inflationary situation is only likely to continue in the months and years ahead making it sensible for greater numbers of landlords to consider their own investing strategies and how moving to investing through a limited company could prove beneficial.

Landlords have a responsibility

There is a social benefit to the greater adoption of limited company buy-to-let, too. For all that landlords are painted as the pantomime villains of the property market, we know that the reality is really rather different. Many of the landlords we speak to feel a responsibility for their tenants, not only to provide the best possible accommodation for them to call home, but also to support them during these challenging times.

Indeed, our own surveys of landlords have found that two-thirds believe they have a responsibility to help their tenants mitigate the rising cost of living.

There are all sorts of measures they could adopt in order to do that, such as making energy efficiency improvements in order to keep gas and electricity bills to a minimum. But equally, by moving to a limited company structure, and reducing the costs of running their property investments, landlords are better placed to keep rents at an affordable ‒ while still profitable ‒ level. 

There remain barriers, whether real or perceived, which hold some landlords back from embracing a limited company structure. It’s crucial for those of us operating in this industry to tackle those hurdles head on, to address misconceptions and open landlords’ eyes to how a limited company structure could work for them.

Investing in this way not only provides landlords themselves with a safety net against inflation, it can help to mitigate the impact of the cost of living crisis on their tenants too.

Please note that forming a limited company structure is not always the correct option for everyone. We encourage landlords to seek tax advice before entering into these arrangements. 
Dr Moubin Faizullah-Khan

Dr Moubin Faizullah-Khan Co-founder and CEO, GetGround

Moubin Faizullah-Khan is Founder and CEO of GetGround, the UK's only buy-to-let limited company creation and management platform. Training initially as a medical doctor, Moubin then worked for Apax Partners and later McKinsey & Company before founding GetGround in 2019.

See all articles by Dr Moubin Faizullah-Khan