Limited Company Buy to Lets

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Sunny Avenue
Mortgages Sunny Avenue
14 Jun 2023

There is a lot of work involved with arranging Limited Company Buy to Lets, it's a tough choice. Should you go down the buy to let through a limited company route, or buy to let through a personal name?

Many property investors don't rely on rental income to support their finances. In such cases, structuring the buy-to-let property within a limited company can offer significant advantages, allowing for more flexibility in managing funds before being subject to higher tax rates of 40-45%. This is one reason why purchasing through a limited company has seen a remarkable 150% increase in popularity in 2022.

In this insight, we will cover what you need to know about limited company buy to lets and how to get started.

Key Takeaways

  • Limited company Buy to Lets are different from personal Buy to Lets
  • You can setup an SPV with the sole intention of buying property. This helps with completion times, keeps the property separate from the main business, and requires less checks on the business.
  • There can be tax advantages to Buying to Let through a LTD company, but whether you benefit depends on if you intend to withdraw money from the LTD or grow your property portfolio.
  • There are additional costs with Buying to Let through a limited company, you should seek tax advice before deciding how to proceed.

What Are Limited Company Buy to Lets?

Limited company buy-to-lets refer to properties that are purchased and owned by a limited company rather than an individual. In this case, the limited company acts as the landlord and manages the property for rental purposes. This structure is often chosen by property investors as it offers certain tax advantages.

Limited company buy-to-let mortgages have gained popularity in recent years due to the potential for reduced tax liabilities and increased financial control.

Looking For Buy To Let Advice?

Are you thinking about your mortgage options ahead of buying an investment property?
We can help you find a mortgage specialist to offer you the very best advice. Complete our Sunny Fact Find form to provide us a bit more detail about your circumstances and we'll find the best-suited adviser for your needs.
Your appointed adviser will contact you to discuss how they can help, you decide how to proceed.

How Do Limited Company Buy to Lets Work?

Limited company buy-to-let mortgages offer distinct differences compared to personal buy-to-let mortgages. Firstly, you require a specialist lender who caters specifically to limited company borrowing. Secondly, the criteria and assessment for lending are unique in this scenario.

With limited company buy-to-let mortgages, you borrow funds to purchase the property under the ownership of the limited company. The directors of the company own shares within it, which grants them ownership of the property. The limited company structure can be established as a standard company or as a Special Purpose Vehicle (SPV). When evaluating your application, lenders consider the following factors to determine its acceptability:

Deposit Amount

The lender will assess the deposit you have available for the property purchase.

Personal Guarantees

Lenders may require personal guarantees from all directors of the limited company.

Rental Income and Mortgage Repayments

The estimated rental income of the property will be evaluated in comparison to the projected mortgage repayments.

Portfolio Size and Experience

Your current portfolio size and experience in the buy-to-let market will be considered.

Property Type

The type of property you are planning to purchase will also be taken into account during the assessment.

Is the Processing Time Longer for Limited Company Buy-to-Let mortgages?

No, it is now common for limited company buy-to-let applications to be processed within the same timeframe as personal buy-to-let applications. In the past, there may have been delays due to lenders adapting to the increased use of limited companies by investors. However, with the growing popularity of limited company buy-to-lets, lenders have streamlined their processes. New special purpose vehicle (SPV) limited companies usually have faster processing times as background checks are only conducted on the directors. Established limited companies may take slightly longer as checks are done on both the directors and the company.

What are the common factors that cause delays?

One common factor is the post-offer legal work. Some lenders do not permit solicitors to act on a dual representation basis, which means involving multiple solicitors can slow down the process.
Another factor is obtaining personal guarantees. Most lenders require personal guarantees for limited company buy-to-lets, which can take time to arrange. Directors and majority shareholders are typically required to provide these guarantees.

Buying to let with a Special Purpose Vehicle (SPV) or Limited Company

A Special Purpose Vehicle (SPV) is a company specifically created for the purpose of property acquisition or investment. It serves as a separate entity, distinct from personal or other company assets. Investors often choose SPVs due to their tax advantages and the possibility of joint ownership.

When applying for a Buy to Let Mortgage using an SPV, only the directors undergo background checks. In the case of an established Limited Company, background checks extend to the entire business and its financial aspects, which can lengthen the application-to-completion timeline.

Benefits of Limited Company Buy to Lets

There are a few clear benefits to be aware of when buying a buy to let through a limited company:

Tax Advantages:

With a limited company buy to let business, the income is received by the company, subject to corporation tax. In contrast, personal buy to let income must be declared for personal income tax, potentially incurring higher tax rates. Corporation tax is currently 19%, and even with the upcoming increase to 25% in April 2023, small profits (up to £50,000) can still be taxed at 19%. This can make a limited company a more cost-effective option from a tax perspective, especially if you don't intend to withdraw from the company.

Deductible Finance Costs

Limited companies can deduct their full mortgage costs for tax purposes, while individuals can only claim back the interest on their mortgage up to a maximum of 20% of the rental income. This difference is due to Section 24, which applies to personal buy to lets but not to limited companies. By declaring larger deductibles, limited companies can have smaller taxable profits and pay less tax.

Future Planning

Owning properties through a limited company offers flexibility for future property ownership transfers. By changing the shareholding of the business, property ownership can be transferred without incurring full stamp duty land tax rates and potential surcharges. Instead, the new owners only pay the 0.5% stamp duty rate for buying shares, potentially saving thousands of pounds in stamp duty costs.

Opting for a limited company buy to let can provide tax advantages, greater deductibility, and future planning flexibility, making it an appealing choice for property investors.

Considerations Of Limited Company Buy to Lets

When deciding whether buying through a limited company is the right choice for you, it's important to take the following factors into consideration:

Additional Costs

Buying through a limited company incurs additional costs such as conveyancing fees and professional services like accounting. These costs should be factored into your budget. However, it's worth noting that these expenses can be deducted for tax purposes within a limited company.

Higher Mortgage Rates

Mortgage rates for limited company buy to lets are typically higher compared to personal buy to let mortgages. However, you still have the option to buy on an interest-only basis if needed.

Personal Guarantees

Lenders often require personal guarantees from directors, which means your personal assets could be at risk if the company defaults on the mortgage. It's important to carefully consider the potential implications of providing personal guarantees.

Tax Considerations

If you are currently paying higher-rate tax, using a limited company can offer significant tax savings. Corporation tax is 19% for rental profits below £50,000 and 25% for profits above that threshold.

Growth Potential

If you have plans to grow your property portfolio quickly, a limited company structure may be advantageous. With lower tax rates, you can reinvest profits back into the company, allowing for faster portfolio expansion.

When evaluating whether to pursue a limited company buy to let, it's crucial to weigh these considerations against your financial goals, tax situation, and long-term investment strategy. 

Getting Money out of the Limited Company

When you need to withdraw cash from the limited company, there are tax implications to consider. Not only will you need to pay corporation tax on the company's profits, but you'll also be subject to income tax on any dividends you take out. Currently, there is a tax-free dividend allowance of £2,000. Beyond that, the tax rates for dividends are 8.75% for basic rate taxpayers, 33.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers.

Personal Buy to Let vs. Limited Company Tax Example:

It's important to note that the example provided here is for illustrative purposes only and does not provide a definitive answer on which option is the best. The numbers used are variables that can significantly impact the outcome, making it essential to seek professional tax advice before making a decision. The most cost-effective approach can vary depending on individual circumstances.

In this scenario, let's assume the landlord is a higher-rate taxpayer, paying 40%, and the limited company has a corporate tax rate of 19%. The corporate tax rate remains at 19% for profits below £50,000.

Please remember that tax rules and rates can change over time, and personal circumstances may vary. Seeking guidance from a tax professional will ensure you have the most accurate and up-to-date information tailored to your specific situation.

Personal Buy to Let

Limited Company Buy to Lets

Withdrawal from LTD Company Buy to Lets

Looking For Buy To Let Advice?

Are you thinking about your mortgage options ahead of buying an investment property?
We can help you find a mortgage specialist to offer you the very best advice. Complete our Sunny Fact Find form to provide us a bit more detail about your circumstances and we'll find the best-suited adviser for your needs.
Your appointed adviser will contact you to discuss how they can help, you decide how to proceed.

Getting Started with Limited Company Buy to Lets

If you are looking for more information on Limited Company Buy to Lets, complete the Sunny Fact Find. The answers you provide help us to find the best-suited adviser for your needs. Your adviser contacts you to discuss how they can help, you decide how to proceed.


Stuart is an expert in Property, Money, Banking & Finance, having worked in retail and investment banking for 10+ years before founding Sunny Avenue. Stuart has spent his career studying finance. He holds qualifications in financial studies, mortgage advice & practice, banking operations, dealing & financial markets, derivatives, securities & investments.

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