Should Landlords Sell Up or Scale Up in 2025?

Across the UK, landlords are choosing to sell up following increasing pressures on the market.

According to research by Pegasus Insight, 19% of landlords sold properties in the last year, while only 8% purchased new ones, exacerbating the shortage of rental homes. What’s more, 41% of landlords plan to sell properties in the next 12 months, while just 6% intend to buy.

So, if you’re a landlord, should you join them and sell up, or is it time to take advantage of an unserviced rental demand?

Shortage of rental properties

Almost 8 in 10 landlords (79%) reported the demand for private rented housing was strong in the third quarter of 2024, with the strongest level of demand coming in the South East—but this demand is being fuelled by a lack of rental housing available, compounded by high house prices making it difficult for first-time buyers to get on the property ladder. According to Oxford Economics, just one in eight renters would be able to purchase a home in the area in which they currently live.

Time to scale or sell up?

Whether the time is right for you to add to your property portfolio will depend a lot on your own financial situation, but there’s no question that the demand for rental properties is there for landlords to take advantage of.

We can help you to figure out if it makes financial sense at this time—book a free, no obligation consultation with our team today.

Pros and cons of setting yourself up as a limited company

Setting up as a limited company has become an increasingly popular option for landlords in the UK, especially after tax reforms such as the phased removal of mortgage interest tax relief for individuals. Indeed, 46,449 companies were set up between January and September to hold buy-to-let properties, an increase of 23% year-on-year.

However, there are pros and cons to this approach.

Pros

1. Tax efficiency: Limited companies pay corporation tax on profits, which is typically lower than higher income tax rates for individuals. This can be advantageous for landlords with significant rental income.
2. Mortgage interest deduction: Unlike individual landlords, limited companies can fully deduct mortgage interest as a business expense, potentially reducing taxable profits.
3. Retained earnings: Profits can be retained within the company for reinvestment, avoiding personal income tax until dividends are drawn.
4. Limited liability: A company structure separates personal and business assets, reducing personal risk if the business incurs debt or financial difficulties.
5. Succession planning: Transferring ownership of a limited company can be more straightforward than transferring individual properties, aiding long-term planning and inheritance.

Cons

1. Higher mortgage costs: Mortgages for limited companies often come with higher interest rates and stricter lending criteria compared to individual buy-to-let loans.
2. Setup and running costs: Establishing and maintaining a company involves administrative responsibilities and costs, including annual accounts, tax returns and potential accountancy fees.
3. Double Taxation: When extracting profits, landlords face corporation tax on company earnings and personal tax on dividends, which may negate the tax benefits.
4. Capital Gains Tax (CGT): Transferring properties into a company is considered a sale, potentially triggering CGT and stamp duty, which can be significant.
5. Complexity: Managing a limited company involves understanding corporate compliance and taxation rules, which can be daunting for inexperienced landlords.

Ultimately, the decision depends on individual circumstances, property portfolio size and long-term goals—and professional advice is essential to weigh these factors effectively.

To find out more about how we can help you optimise your tax efficiency as a landlord, get in touch with our experienced team today. We offer a wide range of services for landlords, including accounts and tax, bookkeeping, managing your exposure to Capital Gains Tax and preparing you for Making Tax Digital (MTD) for landlords.

Click here to book your free landlord accounting consultation. We’ll review your financial situation to provide tailored advice on how to get the most from your property portfolio.