By Kristy Dorsey

Scotland saw a surge in the number of new buy-to-let companies set up in 2021, outpacing most other regions in the UK.

According to figures compiled by residential estate agent Hamptons, the number of incorporations in Scotland rose by 23 per cent last year to 2,040. That was surpassed only by Northern Ireland with annual growth of 36% to 420, and London, up 24% at 15,200.

Average growth across the UK was 14%, with only the north-east of England recording a decline from 2020. In total a record number of 47,400 new buy-to-let companies were incorporated last year.

While individual landlords are effectively taxed on turnover, company landlords are taxed on profit. This means that for some property owners – particularly higher-rate taxpayers – it is more profitable to move their buy-to-lets into a company.

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Half of all new buy-to-let mortgages in 2021 were taken out by a company, rather than someone in their personal name. By Hamptons’ estimates, these companies now hold a total of 583,000 mortgaged properties, accounting for approximately 29% of all existing buy-to-let mortgages.

Aneisha Beveridge, head of research at Hamptons, said they way buy-to-let investors hold property has changed in line with changes made five years ago to tax rules.

“But despite record numbers of rental homes being held in companies, the growth in buy-to-let businesses has come from smaller landlords rather than larger institutions who made up most buy-to-let company owners pre-2016,” she said. “Today, only 20% of buy-to-let businesses hold more than three mortgaged properties, a similar profile to landlords who hold homes in their personal name.”

Rental growth averaged 7.2% across the UK last year, with the largest increase of 12.8% in the south-west of England. Scottish rentals rose by 7.6% to an average of £747 per month.