Over the past few years, the buy-to-let (BTL) market has faced its fair share of hurdles, including tax changes and shifting regulations. But even amidst these challenges, the sector has shown considerable resilience. What’s more, its growth has outpaced several major asset classes.

One key indicator of this resilience is the UK’s rented sector’s expansion. Today, one in every six UK residents lives in a private rental property, showcasing the persistent demand for rental homes.

Earnings Overview: The Figures Speak

In the fiscal year of 2021-22, unincorporated landlords declared a whopping £48.8 billion in property income. This marks a noteworthy rise from the £46.3 billion reported the year before. To put things into perspective:

• HM Revenue & Customs (HMRC) data shows that 2.79 million landlords took the route of self-assessment tax returns. The vast majority of these are individual BTL landlords.
• On top of this, there were 300,000 partnerships that owned rental properties, accumulating earnings of £6.17 billion.

Taking a step back and looking at the broader picture, the total income from UK property saw a 10% surge from 2017 to 2022. This growth can be attributed to two main factors: an increase in the average landlord income to £16,700 and the addition of 100,000 new landlords to the market.

A Closer Look at Expenses

But, as any seasoned property investor will tell you, revenue figures only tell half the story. It’s crucial to consider the associated costs. In 2021-22, finance costs emerged as the most significant expense for landlords, accounting for £6.85 billion. This represented a significant 29% of all expenses claimed against UK property income by non-corporate landlords.

Moreover, the most frequently claimed expenses were in the realms of rent, rates, insurance, repairs, and maintenance. Here’s a noteworthy stat: 67% of unincorporated landlords reported expenses in these categories, with the total claims witnessing a 6% uptick.

A Trend Towards Limited Company Structures

While many landlords opt to purchase properties directly, there’s a growing trend worth highlighting. An increasing number of investors are choosing to use limited company structures. The primary motivation behind this shift? A more favourable tax landscape.