Landlords looking to invest in property through a limited company will face a higher setup fee, but experts believe this will not deter them. Despite the significant increase, the overall cost and benefits of this investment method make it still attractive.

At the start of this month, Companies House, the UK’s registrar of companies, announced an increase in fees for various services, including a substantial rise in the cost of registering a limited company. Previously, the fee was £12, but it has now jumped to £50. This change marks a sharp 316% increase in the registration fee.

Why Choose a Limited Company for Property Investment?

The trend of purchasing buy-to-let (BTL) properties through limited companies has gained momentum. This shift largely resulted from changes introduced by former Chancellor George Osborne, who limited mortgage interest tax relief for landlords. As a result, more landlords have chosen to operate through limited companies, which allows them to deduct mortgage interest payments and other fees as business expenses.

Data from real estate analysts at Hamptons reveals that the popularity of this structure is growing. In the past year, a record 50,004 BTL limited companies were established, surpassing the previous record of 48,502 set in 2022.

Fee Increase Not a Deterrent

Dariusz Karpowicz, director at Albion Financial Services, commented on the fee increase. He noted that while the rise might seem significant, it is “unlikely to deter investors from opting for a limited company structure for buy-to-let investments.” Karpowicz emphasised that the initial cost is relatively minor compared to the overall expenses and potential tax advantages of the investment. He advises investors to work with property tax specialists to ensure their investment strategy aligns with their financial goals.

The rise in BTL applications through limited companies suggests that many investors see the benefits outweighing the initial costs. However, Karpowicz also cautioned investors to be aware of the ongoing obligations and tax implications of this structure to make the most informed decisions.

Perspective from Mortgage Industry

Stephen Perkins, managing director at Yellow Brick Mortgages, shared his views on the fee increase. He pointed out that while the increase is large in percentage terms, it is unlikely to be a deciding factor for property investors considering the overall scale of investment. “No property investor is going to be put off by an additional cost of £38 to register a limited company/special purpose vehicle,” Perkins stated. Many investors already pay more by having their limited companies set up through accountants rather than doing it themselves.

Perkins highlighted that investors would continue to seek tax advice and weigh the pros and cons of buying to let through limited companies versus personal names. He concluded that the small fee to register a company is unlikely to play a pivotal role in their final decision.