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Limited Company Buy to Let Mortgage

Incorporating properties into a limited company structure offer significant tax benefits for landlords.

If you’re considering expanding your property portfolio, you might find limited company buy-to-let mortgages an attractive solution in the current market.

Contact the buy-to-let team today

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“Private Finance provided excellent service securing a remortgage for my property even though it was not a straightforward case. They always kept me updated and was on hand to help and deal with any issues arising. Would definitely recommend Private Finance for their services, offering guidance and support throughout the whole process.”

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How does a Buy-to-Let Mortgage through a Limited Company work?

Through a limited company wrapper, landlords can offset 100% of their interest payments against their tax bill, a benefit that is no longer accessible with personal buy-to-let mortgages.

Incorporating is especially attractive for higher and top-rate taxpayers. Instead of being taxed at a personal tax rate, the rental income for a limited company buy-to-let is taxed at a static corporation rate between 19% and 25%, depending on company profits.

Please be aware, Private Finance is not a tax advisor and this page does not constitute tax advice. Should you like us to introduce you to a specialist in this area, please let us know. Your home may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate commercial finance and some forms of buy-to-let mortgages.

The rise in demand for Limited Company Buy-to-Let

Since changes to mortgage interest rate relief in 2017 (known as Section 24), landlords have faced a continual reduction in tax relief through investments held in personal names.

Demand for limited company buy-to-let has shown significant growth, transforming this once niche lending type for large property investors into a mainstream specialist lending option.

High mortgage rates have stimulated further demand from personal to company owned buy-to-lets. The number of registered limited companies doubled between 2017 to 2022 to over 300,000 for the first time, based of research by Hamptons.

How to apply for a Limited Company Buy-to-Let Mortgage?

You will need to set up an SPV limited company with Companies House before arranging your limited company mortgage. It is also a good idea to organise a bank account for the SPV at the same time as this will be required when applying for a mortgage.

Consult a Tax Advisor

First, we recommend speaking with an expert tax advisor or accountant. They will explain how everything works so you can make an informed decision whether this is the right option for you. They will also ensure that the company is set up properly.

Contact a Specialist Mortgage Consultant

Limited company buy-to-let mortgages are a specialist mortgage type and thus require support from a specialist consultant. You can speak with one of our specialist consultants by enquiring here.

Our specialist consultants have the expertise, the experience, and the industry relationships to help you navigate the limited company buy-to-let market. Using over 175 different lenders, we have access to the best lenders available in the market.

What is a Special Purpose Vehicle (SPV)?

An SPV refers to companies specifically created for the sole purpose of holding and managing property assets, commonly used by landlords and property investors.

The companies are structured in a way that makes them distinct entities from their owners or directors.

By using an SPV, a limited company buy-to-let mortgage is required rather than a standard buy-to-let mortgage.

Is Operating as a Limited Company Right for You?

It is important to consider all aspects of this option compared to other types of buy-to-let mortgages.

Below we explain the pros and cons of limited company mortgages.

Advantages of Limited Company Buy-to-Let

Tax benefits by offsetting interest costs, insurance and repairs
The corporation tax rate is static compared to tiered income tax bands
Benefit from reduced rates of stamp duty
Potential for enhanced strategic tax planning and savings
Potential improved options for inheritance tax
Higher rate taxpayers have potential to borrow more as lenders use an interest coverage ratio (ICR) of 125% as opposed to 145%

Disadvantages of Limited Company Buy-to-Let

Fewer mortgage lenders to choose from than standard buy-to-let
The cost of borrowing is slightly higher compared to a standard buy-to-let mortgage
More expensive for basic rate taxpayers
No capital gains tax allowance when selling
Potential double taxation for salary and dividends

Limited Company Buy-to-Let Mortgage Rates

The cost of borrowing is slightly higher for a limited company buy-to-let mortgage compared to a standard buy-to-let mortgage. However, this higher cost is worthwhile if the benefits are superior. An expert consultant and tax advisor can support you in analysing whether a limited company buy-to-let is suitable for you.

Limited Company Buy-to-Let Mortgage Criteria

The lender criteria are fairly similar to standard buy-to-let mortgages however, there are a few differences. A few important points to consider are:

Lenders may have different criteria for limited company buy-to-let when assessing affordability for directors or shareholders.
The rental income on the property will need to cover the mortgage repayment.
The limited company must have the sole purpose of holding and managing property assets.