Limited Company Buy To Let Mortgages

Many landlords opt for limited company structures to benefit from lower tax rates and the ability to deduct mortgage interest costs from taxable income, which can lead to significant tax advantages.

You should always speak to an accountant or tax advisor to confirm your individual situation.

Using a limited company structure for buy-to-let properties can provide tax efficiencies and planning benefits, particularly for higher-rate taxpayers.

This arrangement can lead to potential tax savings compared to individual ownership due to differences in taxation.

It is important that you speak to an accountant or tax adviser for advice.

Securing a buy-to-let mortgage for a limited company involves meeting criteria similar to individual buy-to-let mortgages, including a minimum deposit, proof of income, and property valuation.

Limited companies must also be registered under specific SIC codes and directors may need to provide personal guarantees.

An SPV, or Special Purpose Vehicle, is a type of limited company set up specifically for managing property investments. It must be registered under certain SIC codes relevant to property management or investment.

The key difference lies in the company’s purpose: a limited company may engage in various business activities, while an SPV is specifically created for property investment, offering a streamlined approach for securing buy-to-let financing. There generally 4 SPV codes lender consider the company to be set up specifically for property investment. These are 68100, 68209, 6820 or 68320.

There’s no legal limit to the number of mortgages a single SPV can hold, though individual lenders may impose their own restrictions on borrowing.

Some landlords choose to chose specialist lenders that can accommodate large portfolios and multiple SPVs.

Relevant purchases by companies will normally be subject to the higher residential SDLT rates, which are 5% above the standard residential rates. This applies in England/Northern Ireland; separate taxes apply in Wales/Scotland.

You can find out your stamp duty costs with our Buy to Let Mortgage Calculator.

A personal guarantee is a commitment by a company director to cover a limited company’s buy-to-let mortgage debts if the company can’t pay.

This legal promise provides lenders with additional security when offering mortgages to corporate entities, which might lack a significant credit history or assets. By requiring a personal guarantee, lenders mitigate the risk associated with the separate legal and financial standing of a limited company. It effectively links the director’s personal finances to the company’s mortgage obligations, ensuring an alternative means of debt recovery for the lender, but also placing the guarantor’s personal assets at potential risk if the company fails to meet its mortgage repayments.

When a property is sold by a limited company, any profit is subject to corporation tax. Unlike individual sellers, companies cannot utilise personal capital gains tax allowances, but the overall tax liability may still be lower for higher rate taxpayers through corporate ownership.

Mortgage rates for buy-to-let properties held within limited companies can be slightly higher than for individual investors, reflecting the perceived increased risk and administrative complexity of lending to the companies.

While high street lenders may offer limited options for limited company buy-to-let mortgages, specialist lenders are often better equipped to handle the unique needs of portfolio landlords and those operating through corporate structures. A mortgage advisor can help you with access to specialist lenders.

Setting up a limited company or SPV for buy-to-let purposes requires registering the entity at companies house with a focus on property management or investment, adhering to the certain SIC codes. Working with an accountant is advisable to ensure proper setup for mortgage eligibility.