Buy-to-Let Watch Episode 05 | Our previous episode, Buy to Let Watch Episode 4, highlighted several positive shifts in the buy-to-let sector and set the foundation for a refreshed approach to the series. This leads us into Buy-to-Let Watch Episode 5, where we explore how today’s landlords can navigate an evolving market and understand why resilience often favours those with stronger portfolios.

While temporary measures such as the stamp duty incentives for landlords offered short-term breathing space, the larger pressure point has always been the phased removal of mortgage interest tax relief, which reached full implementation in the 2020/21 tax year. These changes continue to shape landlord strategies and reinforce the importance of selecting the right structure, whether through personal ownership or a limited company buy-to-let mortgage.

The Financial Impact on Landlords

Landlords continue to feel the long-term effects of the tax reforms introduced several years ago, with many now experiencing higher tax liabilities and reduced profitability. For example, data from Kensington previously demonstrated that a landlord earning £12,000 in annual rent and paying £8,400 in mortgage interest saw their taxable profit fall sharply from £2,160 to only £480.

This financial pressure has led many more minor or accidental landlords to exit the market, particularly those operating on tighter margins. As a result, the sector is increasingly dominated by professional investors who have adapted more quickly to changing regulations.

Resilience Through Strategic Diversification

Professional landlords with larger portfolios have generally remained resilient by reassessing their business models and diversifying into other forms of property investment.

Two sectors that have become increasingly attractive are commercial property and holiday lets, both of which operate under different tax rules compared to traditional buy-to-let. Despite earlier challenges during national lockdowns, confidence in short-term let markets has returned as travel activity continues to recover.

Landlords and advisers exploring alternative rental models may also find value in reviewing our HMO mortgage guidance to understand how higher-yield properties can support long-term portfolio stability.

Growing Lender Support and New Product Innovation

Lenders have responded to this shift in demand by launching new products tailored to emerging opportunities.
Recent examples include:

West One introducing a holiday let product up to 70 per cent LTV with a reduced rental stress test
Ipswich Building Society offering an 80 per cent LTV mortgage specifically for holiday lets

These developments highlight expanding lender appetite across specialist asset classes and reinforce the increasing number of routes landlords can explore when restructuring their portfolios.

Increasing Popularity of Houses in Multiple Occupation

Houses in Multiple Occupation (HMOs) continue to attract landlords seeking stronger rental yields to counter rising costs. Lenders have broadened their criteria to accommodate this demand.

For instance, LendInvest now lends on HMOs with up to 15 rooms, and Masthaven previously opened HMO solutions to first-time landlords. Higher occupancy and improved rental income often make HMOs a viable strategy for investors seeking higher cash flow.

For a deeper overview of how lenders assess these cases, visit our HMO mortgage support page.

Adapting to an Evolving Market

Despite ongoing regulatory and market changes, opportunities remain strong for landlords who are willing to adapt. Exploring niche sectors, reassessing portfolio structure and leveraging specialist lending are proving essential for long-term success in the private rented sector.

Advisers supporting landlords in today’s market can also find additional guidance in our buy-to-let mortgage resource hub for brokers.

Limited Companies

Using a limited company structure for property investment has become an increasingly popular strategy among landlords seeking greater tax efficiency and long-term planning benefits. While not universally suitable, this approach is particularly appealing for higher-rate taxpayers and investors planning to scale their portfolios.

Those advising clients on incorporation may also benefit from our specialist guidance on limited company buy-to-let mortgages.

Growth Trends and Incorporation Statistics

Research from 2020 highlighted rapid growth in limited company formations for buy-to-let, with more than 41,700 new incorporations registered – a 23 per cent year-on-year increase. This surge reflects a broader trend towards tax-efficient ownership structures and strategic long-term planning by portfolio landlords.

Lender Appetite for Limited Company Borrowing

More than 30 lenders – excluding commercial banks – now consider mortgage applications from limited companies. Although availability has broadened, Special Purpose Vehicles (SPVs) remain the preferred structure for most lenders, given their clarity and lower perceived risk. Fewer than half accept trading companies, and those that do choose corporate structure as an important part of the planning process.

Building Societies Expanding Their Offering

Several regional building societies have strengthened their buy-to-let propositions by offering bespoke lending for limited company landlords. Providers such as Bath, Newbury, Monmouthshire and Nottinghamshire Building Society offer competitive products designed for specialist property types and more complex cases. Their tailored criteria often support landlords underserved by mainstream lenders.

Financial Advantages of Limited Company Ownership

Holding property within a limited company can provide notable financial benefits.
For higher-rate taxpayers:

Personally owned property often requires rental income to exceed mortgage payments by 40–45 per cent
Limited companies typically work from a more favourable calculation, often around 25 per cent, improving affordability

Additional tax advantages and streamlined profit extraction have further accelerated the popularity of incorporation among professional landlords.

Sustained Growth in Limited Company Buy-to-Let

The combination of tax incentives, competitive rental calculations, and evolving lender options suggests continued growth in this sector. Landlords increasingly value the strategic benefits of limited companies, prompting further diversification within the market. As awareness grows, more lenders will likely engage with this dynamic segment.

Table of Noteworthy Limited Company Offerings:

Lender	Rate	Type	Lender fee	LTV
Precise	2.79 per cent	2-year fix	1.5 per cent	75 per cent
Habito	3.04 per cent	2-year fix	£1,995	65 per cent
Buckinghamshire	2.99 per cent	3-year discount	£1,195	75 per cent
LendInvest	3.29 per cent	5-year fix	1.75 per cent	65 per cent
Landbay	3.34 per cent	5-year fix	1.5 per cent	60 per cent
Vida	3.34 per cent	5-year fix	£3,750	75 per c

Why This Matters for Brokers

The buy-to-let market moves fast, and episodes like this one ensure you remain ahead of the curve. With lenders shifting their strategies weekly, brokers who understand the nuances of pricing cycles and product innovation will be better equipped to deliver value-driven recommendations.

If you are considering new support options, our mortgage network for brokers can provide compliance support, sourcing tools and lender access to help you grow your business.

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Question	Answer
What impact have tax changes had on landlords?	Tax reforms have increased costs for many landlords, particularly higher-rate taxpayers. Reduced mortgage interest relief means profits are lower, prompting some smaller landlords to exit the market.
Why are more landlords diversifying their portfolios?	Diversification into HMOs, holiday lets, and commercial properties helps landlords offset tighter tax rules and achieve stronger rental yields. These property types often provide higher income or more favourable tax treatment.
Are lenders supporting alternative property types like holiday lets?	Yes. Several lenders offer specialist holiday let products at higher LTVs, reflecting strong demand. This includes lenders offering 70 to 80 per cent LTV options with flexible rental calculations.
Why are HMOs becoming more popular with investors?	HMOs typically offer higher rental income compared to single dwellings. This additional yield helps landlords counter increased tax liabilities and rising operational costs.
Can first-time landlords get an HMO mortgage?	Some lenders now consider HMO applications from first-time landlords. Criteria vary, making it important to work with brokers who understand specialist lender requirements.
What is an SPV, and why do lenders prefer it?	A Special Purpose Vehicle (SPV) is a limited company created solely for property investment. Lenders prefer SPVs because they present lower risk and simpler business structures compared to trading companies.
Why are limited companies becoming popular for buy-to-let?	Limited companies benefit from more favourable tax treatment, including full mortgage interest relief and lower profit extraction costs. This often results in improved affordability for higher-rate taxpayers.
Do mainstream lenders offer limited company mortgages?	Yes. More than 30 lenders now accept limited company applications, including a growing number of building societies offering bespoke products for specialist cases.
Are there financial advantages to holding property in a limited company?	Yes. Rental stress tests are typically more favourable, and landlords can benefit from corporation tax treatment instead of higher personal income tax rates.
Is a limited company suitable for every landlord?	Not always. While many investors benefit, suitability depends on income level, portfolio size, long-term strategy, and exit planning. Professional tax advice is essential before incorporating.
How can landlords improve long-term profitability?	Exploring higher-yield sectors such as HMOs, diversifying portfolios, refinancing, or switching into a limited company structure can enhance cash flow and long-term returns.
Where can brokers find guidance on specialist buy to let lending?	Brokers can access detailed resources through Connect’s internal guides, including HMO mortgages, limited company buy to let, and specialist landlord support.

Buy-to-Let Watch Episode 05