Limited company buy-to-let mortgages

A limited company buy-to-let (BTL) mortgage is a loan that lets a business buy or remortgage a property to rent out.

The mortgage sits in the company’s name - meaning it's the company that owns the property, receives the rental income and is responsible for paying the mortgage.

Some landlords use this route to:

• Keep property borrowing separate from their personal finances

• Manage future property plans through a business structure

• Support tax and liability requirements

It's not automatically the best option for every landlord though, so it's still important to compare the costs and lender requirements before you apply.

And if your company just wants to buy a commercial property such as a shop or warehouse, you may need a commercial mortgage instead of a limited company BTL mortgage.

Let's explore how a limited company BTL mortgage works in more detail.

Setup

You need to be a limited company before you apply - or at least in the process of setting one up. Many landlords use a special purpose vehicle (SPV) for this structure, which is a company registered solely to buy and manage rental property. Some lenders will only lend to SPVs.

The mortgage sits in the company’s name, but lenders still look at the directors and shareholders behind the business during the application process.

Affordability

Lenders usually base affordability on the rent the property is expected to earn. This often needs to cover 125% to 145% of the monthly mortgage payments, so the lender can see the property will support the mortgage.

Lenders may also test the mortgage against a higher interest rate, such as 5.5%+ or the product rate plus 2%. The product rate is the rate attached to the mortgage deal you choose. This helps the lender check your company could still afford the loan if rates rise.

Tax

A limited company pays corporation tax on profits, which is different from paying income tax an individual landlord. This can make the company route more tax-efficient for some, especially if you want to keep profits in the business or grow your portfolio.

But it's not always the cheaper option. You still need to think about mortgage costs, fees and your long-term plans before deciding.

Tax is one of the main reasons landlords consider a limited company BTL mortgage. Let's break down why.

Corporation tax

A limited company pays corporation tax on its profits, which is different to you paying income tax on rental profits made in your own name.

Your company can also deduct allowable expenses and costs before working out the taxable profit. This can include:

• Mortgage interest

• Letting agent fees

• Repairs

• Insurance

• Accountancy fees

Corporation tax is currently 19% for profits up to £50,000 and 25% for profits over £250,000. If company profits fall between these two amounts, marginal relief creates a tapered rate between 19% and 25%.

So let's say your company receives £24,000 in annual rent but pays £7,000 in mortgage interest and £2,000 in other allowable costs, its taxable profit would be £15,000.

At 19%, the corporation tax bill in this example would be £2,850.

Personal tax

Owning property through a company does not always remove your personal tax liabilities. If you take profits out of your company as dividends you may need to pay dividend tax.

From April 2027, property income tax rates for individuals are due to rise by 2% across the tax bands to 22%, 42% and 47%. This may make the company route more appealing, but how beneficial it is still depends on your wider tax position.

Stamp duty

A limited company usually pays stamp duty land tax (SDLT) when it buys residential property in England or Northern Ireland. The higher rates for additional properties normally apply, which adds 5% to each standard SDLT band.

SDLT is calculated in slices, not as one flat rate. For example, if a limited company buys a £250,000 rental property, the SDLT could be:

• 5% on the first £125,000 = £6,250

• 7% on the next £125,000 = £8,750

• total SDLT = £15,000

You may also pay SDLT if you transfer a property you already own into a limited company, because your company is effectively buying it from you as an individual. This could also trigger capital gains tax.

It's a complex area, so it may be worth getting tax advice before moving existing properties into your company.

When comparing limited company BTL mortgages, the interest rate is important but it's not the only cost to check. You should also look at the fees, mortgage type and deal terms before deciding. Here's what that all means.

Fixed vs variable rates

A fixed-rate mortgage keeps your interest rate the same for a set period. This can make budgeting easier because your monthly payments stay the same during the fixed term.

A variable-rate mortgage can move up or down. It may cost less at the start, but your payments could rise if interest rates change.

Interest-only vs repayment

Many limited company BTL mortgages are interest-only. This means your company pays the interest each month, then repays the original loan at the end of the mortgage term.

A repayment mortgage costs more each month because the company pays back both the loan and interest. If you go for this option, the debt reduces over time, lowering the amount owed to the lender at the end.

Fees

Fees may include:

• arrangement fees

• valuation fees

• legal fees

• broker fees

• early repayment charges

• company admin and accountancy costs

A specialist broker or financial advisor can help you compare suitable deals - especially if you need a particular lender or have a more complex portfolio.

It ultimately depends what you need. For example, if you need funding for property related costs such as refurbishments or equipment, you may just want to compare business loans.

A special purpose vehicle (SPV), also known as a special purpose entity (SPE), is a limited company set up for one specific business purpose or objective.

For buy-to-let, this usually means buying and managing rental property. Many landlords use an SPV because it keeps the property business separate from other income or business activity.

Some lenders prefer dealing with SPVs because they're often simpler to assess - the company’s purpose is clear meaning there's less risk of unrelated business costs or debts affecting the mortgage.

Setting up a limited company for buy-to-let is fairly simple, but it's worth getting everything together before you apply for a mortgage.

Here's how to do it in 4 simple steps.

1. Register with Companies House

You need to register your company with Companies House. If you haven't already, you need to choose a company name, add a registered address, appoint at least one director and confirm who owns or controls the company.

Many landlords set up a new company just for property. This can make the mortgage application simpler, especially if the lender prefers SPVs.

2. Choose your SIC codes

SIC (Standard Industrial Classification) codes tell Companies House what your business does. For buy-to-let, common property codes include:

• 68100 - buying and selling of own real estate

• 68209 - other letting and operating of own or leased real estate

Some lenders may expect specific property-related SIC codes too, so check this before you apply for the mortgage itself.

3. Register for corporation tax

Your company should be set up for corporation tax when you register it. If not, you may need to do it separately through HMRC.

Once you're set up - you need to keep your business records, file your company accounts and submit a company tax Return.

4. Open a business bank account

A business bank account helps keep the company’s money separate from your own personal finances and is a legal must for limited companies.

In the case of a limited company BTL mortgage, you can use it to:

• Receive rent

• Pay the mortgage

• Cover landlord costs

• Keep clearer records for your accountant and HMRC

Find a bank account that suits your limited company.