Buy-to-let businesses have become the largest single type of business in the UK – with nearly four times as there are fast food takeaways or hairdressers.

There are more companies set up to hold buy-to-let property registered at Companies House than any other type of business, according to research from the estate agent Hamptons.

Marking a decade of growth, the figures illustrate the switch in tactics by an army of small-scale landlords hit by the withdrawal of tax breaks for those filing tax returns as individuals.

The number of companies holding buy-to-let property across the UK passed the 400,000 mark in February for the first time. By the end of last month, 401,744 companies were registered, as investors continued to move their portfolios from their personal names in an attempt to reduce their tax payments.

That total is up more than fourfold from 92,975 in February 2016, when full mortgage interest tax relief began to be withdrawn from homes owned by higher-rate taxpayers.

Hamptons said if the tax changes had not come into effect, most buy-to-let properties would have remained in personal ownership, where investors declare taxes in their annual self-assessment.

The rise comes despite many smaller landlords selling up due to higher mortgage costs. Last July, the banking body UK Finance reported that the sector shrank for the first time in almost three decades.

There was some good news for tenants, who have been clobbered with double-digit rent increases in recent years. According to Hamptons, the average monthly rent on a new let rose by 1% to £1,355 across Britain in the year to February, the lowest rate since September 2020, when rents started returning to growth after falling at the start of the Covid pandemic. For renewals, rents rose by 5.6% to an average of £1,262 a month.

Newly agreed rents in London fell by 2.8%, taking the cost of moving home back to May 2023 levels. Within inner London, rents fell by 5.1% over the last 12 months, and are now 9.4% below their peak last year.

Aneisha Beveridge, head of research at Hamptons, said: “Tenants moving into a new home have seen rental growth grind to a halt, with prices rising at the slowest rate since September 2020.

“Londoners, in particular, have seen rents go backwards, with inner London rents now falling at about half the pace they did during the pandemic. This means some tenants who moved relatively recently may be able to find themselves a better deal by moving again.”

The rise in buy-to-let companies has been driven by a record 61,517 new limited companies being set up in 2024, a 23% increase on what had previously been a record in 2023.

There are now 680,000 buy-to-let properties held in a limited company structure across England and Wales, with the number rising by between 70,000 and 100,000 a year. Not all of them are new rental properties – some are being moved from personal names into a limited company owned by the same landlord.

The pace of increase may slow because of the impact of raising the stamp duty surcharge from 3% to 5%, and falling mortgage rates mean more investors keep homes in their own names.

However, most (up to three-quarters) new buy-to-let purchases will still go into a limited company, Hamptons said.