Limited Company Buy-to-let Mortgages

What is a Limited Company Buy-to-Let?

A limited company buy-to-let mortgage is a specific type of mortgage designed for buying and financing rental properties through a limited company, rather than in your personal name. It differs from a standard buy-to-let mortgage in several key ways:
Who it’s for

  • Established landlords:  Those who already own multiple properties and want to create a more tax-efficient structure for future purchases.
  • Investors looking for portfolio growth:   Individuals or groups aiming to build a significant property portfolio through a company.
  • Those seeking limited liability:   Individuals wanting to shield their personal assets from potential property-related debts or legal issues.

Key features

  • Owned by the company:  The property is owned by the limited company, not the individual(s).
  • Tax implications:  Profits are taxed as Corporation Tax (usually lower than Income Tax) and rental income is treated as business income.
  • Interest-only mortgages:  You typically only pay the interest on the loan during the term, with the capital repaid when the property is sold or the mortgage matures.
  • Stricter criteria:  Lenders apply stricter affordability and creditworthiness checks compared to regular buy-to-let mortgages.
  • Personal guarantees often required:  Directors of the company may need to provide personal guarantees for the loan.

Is a limited company buy-to-let similar to a regular buy-to-let mortgage?

A limited company buy-to-let mortgage differs from a regular buy-to-let mortgage in a few ways

  • The fees and interest rates are usually higher.
  • You will need to act as a guarantor on the mortgage and as such will need to have an additional solicitor for independent legal advice. Factor in £150-£300 per director.
  • You will be able to offset the mortgage interest as an expense but any profit will incur corporation tax.
  • Make sure to speak to an accountant to ensure your company is set up with the correct SIC codes for the purposes of purchasing and letting out property.

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Things to consider

  • Setup costs: Setting up and maintaining a limited company involves additional fees and administrative work.
  • Special Purpose Vehicle: Generally you cannot purchase property with a mortgage through a trading company, so you must set up a separate ‘special purpose vehicle’.
  • Tax advice crucial: Understanding the tax implications and potential complexities is essential before proceeding.
  • Not suitable for everyone: It’s best suited for those with specific investment goals and the capacity to manage a limited company.

If you’re unsure whether a limited company buy-to-let mortgage is right for you, talk to us, we can help guide you on the best route alongside our accountant trusted partners.

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Financial advisory in Worcestershire and Kent

Based in Droitwich Spa, we’ve proudly supported clients of all ages since 2004. The opening of our second office in Sevenoaks allowed us to extend our bespoke financial services even further, making SN Financial a trusted financial adviser for individuals, couples, families and businesses across Worcestershire, Kent and the rest of the UK.

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