Limited Company Buy To Let

Buy to let property with a limited company mortgage or personal investment

In recent times property investment and buy to let have become more of an interesting option for investors. Because the property market can be so volatile compared to most markets, the investment opportunities are plentiful for long term investment.

So should you finance your buy to let property with personal investment or a limited company mortgage? That is the question we are here to answer for you. We can guide you through the two options and allow you to make the best decision for yourself on what is the best way to invest in your buy to let property. We know it can be hard making decisions like this, especially when it comes to your future, so we have put together this guide to make sure you are aware of the positives and negatives of both and can make an informed decision.

Investing in buy-to-let property through a limited company

In the 2020 budget, further tax relief changes have been made available to landlords using buy to let, this has led to more demand for investing in property through a limited company so that they can get the same reliefs for their taxes.

When investing in property through a limited company, it can differ on whether it is going to be beneficial to you or if continuing as an individual trader is more suited to what you want. To make this decision, it is best you know the pros and cons of investing through a limited company and what comes along with it administratively. What it all comes down to in the end though is the current circumstances you find yourself in, this makes it even more important before making any decisions to look for professional advice.

Your other option when using a limited company is to use an SPV (Special Purpose Vehicle) this is another form of a limited company set up to manage ownership of property only and nothing else.

Pros and cons of setting up a buy to let limited company

Anyone who is a landlord that used a limited company is not impacted by the tax changes that were brought in for individual landlords in 2017. If you choose to go with a limited company, then they are treated as an individual legal entity, this then ring-fences your personal liability for any financial dealings.

With a limited company, your choice of mortgage products can be more restricted, and you can also end up paying higher interest rates. As well as this you will also need to pay corporation tax on any profits of your limited companies trading which at the time of writing is about 19%. If you choose to use a limited company for buy to let then as a landlord, you would need to pay stamp duty on any properties that you own when they are transferred to the limited company or sold. What would be seen as another negative for the use of a limited company is that your accounts for the business can become more complicated, obviously with a good accountant however this can be rectified as well as this sometimes it can become harder to get any money out of your business especially if you are being advised by a professional.

The growth of limited company buy-to-let

People investing in properties via limited companies instead of as an individual has become very popular within the last year. It is said that one in five properties that are rented are owned by a corporate landlord, this is the highest ratio since the records began back in 2010, this is according to a source form Countrywide.

In the capital, this has become even more prevalent as more than 25% of rented homes in London are now becoming owned by corporate landlords. Also Mortgages for Business a specialist broker has said that a huge 77% of applications that are submitted for buy to let mortgages were made by limited companies in the years first quarter.

Check buy to let limited company mortgage rates

If you are someone that is looking to get a buy to let with a limited company mortgage, then you need to be aware of the rates you can expect from the mortgage. When you use a buy to let mortgage for a limited company, the rates can end up being higher than if you were to apply for a buy to let mortgage as an individual landlord. It is advised when you are looking into doing a mortgage through a limited company that you use a limited company buy to let mortgage comparison sites to make sure that you can get the best rates.

See the top 5 Limited Company mortgages rates in the table below

Name Maximum LTV Initial Rate Subsequent rate (SVR) Fees
Vernon Building Society 70% 2.5% for 36 months (5.2% discount on SVR) 5.2% Variable £1,644 based on a £200k loan
Newbury Building Society 75% 2.65% for 36 months (3.95% discount on SVR) 3.95% Variable £1,600 based on a £200k loan
Molo 75% 3% fixed for 24 months 4.41% Variable £2,123 based on a £200k loan
Molo 65% 3.05% fixed for 24 months 4.41% Variable £3,123 based on a £200k loan
Vernon Building Society 75% 3.05% for 36 months (5.2% discount on SVR) 5.2% Variable £1,144 based on a £200k loan


Buy-to-let property as a personal investment

The most straightforward option when it came to buying and keeping property portfolios was as an individual previously. But with adaptations to tax reliefs, this is now becoming a less cost-effective option. Tax relief changes over the last few years for landlords have now had an impact on basic rate taxpayers as a knock-on effect.

The budget set out this year has now started the introduction of the last process to remove tax relief which was previously claimable on mortgage interest costs. Because of the restructuring to interest fees and their inclusion, the basic rate taxpayer is now being pushed up to the higher bracket as they cannot take the interest accrued from the income they earn. Instead of now decreasing the income figure, the interest caused by the tax liability would be claimed through tax credits.

Pros of buy-to-let property as a personal investment

There are a number of positives when it comes to personally invest in a buy to let property. It will give you a greater personal liability and also a greater choice when it comes to choosing your mortgage products. It will also give you a choice of lower mortgage interest rates saving you more money, as well as this you do not have to pay corporation tax for this as it’s personal and not part of a corporation. As of this year, the stamp duty has been put on hold for properties priced up to 500k this according to Rishi Sunak save around £4,500 on the average purchase, if you do however purchase additional homes including buy to let properties then you will incur a 3% surcharge on homes up to 500k.

Another benefit of personal investment is the ease of your accounts as they are made less complicated when not being done for a company, along with this because it is an individual investment it is easier for you to have access to your money.

How to transfer personal investment ownership to a limited company

If you are a personal owner of a buy to let property or properties, then you are able to transfer ownership of those properties to a limited company. This is something that a lot of landlords are looking into so they can receive reductions in tax liability. Because this would be classed as a sale of ownership it isn’t actually as easy as you would think, it would need to be done through a property sale and repurchase transaction which can be quite costly.

It can be costly due to the fact you pay capital gains tax along with stamp duty, but as well as these there are legal fees, mortgage costs, and even valuation charges for the properties. While looking into this avenue, it may be worth keeping in mind that you need to keep up with the administration involved with a limited company such as annual accounts and returns filings. Although there are costs involved, it may still be worth transferring because of the savings you can make from expenses that can be claimed back like mortgage broker fees before submitting tax.

Contact us for professional advice

Hopefully, this guide can help you understand buy to let from a personal and corporate point of view and give you the information needed to make your investment decision. It doesn’t matter if you are experienced or not in property investment it is important to understand the positives and negatives of what you are investing in and also to seek help from professionals should you need it.

If you require any further help or information after reading this guide, then please feel free to contact us so that we can assist you further with any advice and help you would like that wasn’t answered in the guide.