IMB Blog

Limited Company Buy to Lets

The UK has one of the most competitive and flexible mortgage markets in the world. There is certainly no shortage of choice.Private landlords who operate as individuals have seen an increase in their tax bills, due to the changes in Buy to Let tax relief and, as a result, there has been a growth in the number of limited companies established for the purpose of managing a rental portfolio.

Generally, roughly three-quarters of Buy to Let mortgages are only available to individual landlords. The remaining quarter are Buy to Let mortgages for limited companies, and so are available to SPVs, limited companies, and/or offshore limited companies.

The Reality of Tax Implications.

It is important to know that any property you add to your ‘wealth’ will be taxed. And the tax you pay won’t just be the net income on rent or the capital gains on the property. It may be that the property income or capital gains add so much to your wealth you end up losing benefits and paying more tax.

The careful planning of your financial strategy in terms of the type of mortgage you select is vital if you want to maximise your overall investment returns. Research your mortgage options and have a clear ‘game plan’ for your investment if you want to optimise the financial returns.

Even though you might have to look further afield in order to get the mortgage or remortgage you want, traditional banks and building societies much rather concentrate on the more straightforward mortgage market, so it will probably benefit you to engage the services of a mortgage broker, who has a much wider and deeper understanding of the market. A good place to start your search is contacting Independent Mortgage Brokers, mortgage, and remortgage advisors and a Trustpilot rated ‘excellent’ company.

Benefits of Limited Company Buy to Let Mortgages.

Should youpurchase and run your Buy to Let property through a limited company or as a personal investment?There are a number of factors to consider before making any decision.

  1. Income Tax.

By running your Buy to Let property through a company, you will avoid paying income tax. So long as you don’t withdraw any profits from the business, i.e. you reinvest the profits back into the business for future re-investment. If you manage to do this, you will be increasing the future value of the company whilst avoiding any income tax.

Instead, small companies pay just 19% corporation tax on their rental income. However, when money is taken out of the business as a dividend, higher rate taxpayers incur a further tax charge of 25%. If the properties are sold and the company disappears, capital gains tax is charged on the lot at a minimum of 24% assuming you have held on to the properties for ten years. So, you would lose about 40% in tax.

  1. Capital Gains Tax.

This taxes you on any gains in the capital value of your Buy to Let property when you come to sell it. Essentially, if you purchase the Buy to Let property for £200,000 and sell it 5 years later for £250,000 then you would be liable to pay tax on the profit of £50,000. Withthe recently announced changes to a capital gains tax rate of 18%, your tax bill following the sale of this property would be £9,000 (£50,000 x 18%).

If and when you sell any of your properties at any time in the future, you will have to pay capital gains tax on any profit made in the capital gain. Currently, in the UK, this is 18% however, for trustees or businesses this figure rises up to 28%.

What Types of Limited Companies Are There?

Generally speaking, there are 2 types of company that purchase Buy to Let (BTL) properties

  1. Special Purpose Vehicles (SPV’s).

These types of companies are established and registered at Companies House specifically for the purpose of holding single or multiple properties. This is the preferred type for mortgage providers, due to the simple company structure. Therefore, you may find there are more options available when selecting a mortgage. Mortgage providers are generally happy to lend to both newly established SPV’s (no accounting history) and existing SPV’s (existing financial track record).

  1. Trading Limited Company.

These companies can also purchase or hold property assets but, because they usually have other income streams and business channels, there is a higher element of risk and therefore considerably fewer mortgage providers to choose from when selecting a mortgage. The interest rates and fees may be slightly higher as a result and the track record of the company may also be taken into account.

How do You Set Up a Buy to Let Limited Company?

  1. Register as a limited company with Companies House.

This process is also called ‘incorporating’. You can do this yourself online, or you may want to go through a solicitor or accountant. The standard fee for electronic registration is £12 and takes 24 hours to turnaround. The price rises to £40 for paper submissions and takes up to 10 days.

  1. Provide Company Details.

You’ll need to provide a few basic details, such as your company name, address, the director, details of the company’s shares/shareholders, and what it does (this will require you to check your SIC code or standard industrial classification of economic activities).

  1. Register for corporation tax.

Once you’ve officially set up your company, you’ll need to register for corporation tax. Again, this needs to be done through Companies House. You can arrange this online using your 10-digit unique taxpayer reference (UTR), which will be sent to your company address within a few days of becoming incorporated.

  1. Register for Corporation Tax.

You’re required to register for corporation tax within three months of incorporating, or else you’ll face a penalty. You’ll need to tell HMRC your company’s registration number, the date you started to do business (your company’s first accounting period will start from this date), and the date your annual accounts are made up to.

Once that’s sorted, it’s official – you’re a limited company for tax purposes and will now pay corporation tax on your company’s profits. However, if you already have a portfolio, you’ll need to start the process of transferring those properties over to your company.


For more information on owning Buy to Let property, contact Independent Mortgage Brokers, a Trustpilot rated ‘excellent’ company offering online mortgage advice.


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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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