Becoming a limited company landlord

Investing in property through a limited company has become a popular choice for many landlords

According to research by estate agency Hamptons, in 2020 a total of 41,700 new limited companies were set up for Buy to Let businesses, an increase of 23% on 2019*.

The growth of limited company Buy to Lets looks set to continue, but is it right for all landlords? Let’s look at some of the factors you need to weigh up when considering such a decision:

Tax benefits

Landlords operating within a limited company are able to claim 100% limited company mortgage interest relief and benefit from a lower rate of Corporation Tax, rather than Income Tax, on profits. This is seen as a major benefit when compared to private landlords, where mortgage interest relief is restricted to the basic rate of income tax and all earnings from rental income are subject to taxation. However, as mortgage interest rates tend to be higher, the benefits of setting up a limited company for buy-to-let property generally favours higher-income taxpayers or multiple property landlords. Always speak to a tax adviser about your circumstances.

Rising interest rates

Low interest rates have kept finance costs down over recent years. However, with the Bank of England having increased the base rate for the first time in three years in 2022, we expect the market to move towards a rising interest rate environment. This will have a financial impact on many landlords because their repayments are likely to increase when their current fixed rate comes to an end. Factoring this into your projections will help smooth any potential financial fluctuations in the future.

Market trends

Another emerging change is the way people live and work. Since the pandemic, there’s been a shift in demand for housing from big cities towards more provincial towns and villages. Look at local trends to choose the best location for your investment.

Limited liability

As a limited company landlord, your personal finances are largely protected. If something goes wrong your liability is limited to the value of your financial investment in the business. You can further mitigate this risk by taking out professional indemnity and personal liability insurance.

Strict recordkeeping and reporting

There is more administration when operating as a limited company set-up and you must keep accurate financial records throughout the year. You are required to file company accounts and an annual tax return for the business at Companies House as well as your usual self-assessment Income Tax return. This all adds up to higher accountancy fees.

From 1 April 2022, as part of the digitisation of UK Tax, it’ll be mandatory for all VAT-registered businesses to keep digital records and submit their VAT return through Making Tax Digital (MTD).

Planning for the future

Think about what you want to do with your property in the future. If you plan to transfer ownership to a family member, then it’s simpler and more tax-efficient to do this through a limited company. A professional tax adviser will be able to talk you through the implications for Inheritance Tax, Stamp Duty and Capital Gains Tax.

Arranging the right mortgage finance

Competition amongst lenders to offer mortgage finance to limited company landlords has intensified in recent years, so speaking to an independent broker to find the right mortgage has become even more important. Even though interest rates can differ between Buy to Let limited company mortgages and those deals on offer to landlords taking out a mortgage in their own name, at Vincent Burch, we have access to both. Limited company mortgage rates for Buy to Let properties are typically higher than those taken out by individuals but because we deal directly with specialist lenders, we can find you the best deal for your specific circumstances.

It’s also worth noting that whatever your situation, limited company mortgage criteria require the company to be set up as one of the following:

  • Special Payment Vehicle (SPV) – a company created for a specific purpose, in this instance for the purchase and management of buy-to-let properties.
  • Trading company – typically an existing company looking to invest in a Buy to Let property to add to a current portfolio of assets.

Unlimited mortgage advice

As an independent mortgage broker with extensive experience, we’re happy to talk to you about all aspects of your mortgage finance. We understand the Buy to Let market and have access to a wide range of Buy to Let limited company mortgages from specialist lenders, including many that are not available on the high street.

Our friendly team will find you the best limited company mortgage rates available and help you make the right choice for your finances and your business.


*Source: Hamptons, December 2020 Lettings Index

Contact us today for personal mortgage advice and a quote, call 01603 340644 or email [email protected]

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