Compare limited company buy to let mortgages

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With a limited company buy to let mortgage, you could get a rental property under a limited company.

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YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. The FCA does not regulate buy-to-let mortgages for commercial and investment properties.
Last updated
July 5th, 2023

What is a buy to let mortgage for a limited company?

buy-to-let mortgage for a limited company is a specialist type of mortgage for landlords who want to buy a property through a company.

Some investors decide to set up a company solely for owning properties because of the tax benefits on offer. 

These companies are specifically structured to buy, sell or let property and are known as a special purpose vehicle (SPV).

Changes to income tax relief for residential landlords brought in from 2017 increased the number of landlords using a limited company to buy and own properties. 

If you use a SPV to buy your property you will not be able to take out a standard residential or BTL mortgage and will instead need a limited company buy-to-let mortgage. 

Like most other buy-to-let mortgages, limited company buy-to-let mortgages are not regulated by the Financial Conduct Authority (FCA) as they're products for businesses rather than consumers. 

Tom Clayton, Mortgage Expert at Mojo Mortgages, said:

"We’re seeing more buy-to-let mortgages through limited companies, due to tax changes. It’s generally more beneficial with larger portfolios, but we do see people starting out in the buy-to-let industry opting for this route as they plan to grow their business and know that it will be worth it in the long run."

How does a buy to let mortgage for a limited company work?

Buy-to-let mortgages for limited companies are for landlords who own their property through a company. 

Lenders offering these mortgages will usually require the company to be an SPV which have structures designed specifically for, and limited to, owning properties. 

As with standard mortgages, lenders have different criteria for assessing the affordability of landlords who are directors or shareholders of the company owning the property. 

Lenders will want to make sure the rental income on the property more than covers the mortgage repayment - normally the lender will require the rental income to be at least 125% of the interest payment. 

Underwriters will also examine the financial situation of any shareholders or directors of the company and require a minimum level of personal income to cover any void periods. 

Many buy-to-let mortgages for limited companies are offered through specialist lenders, which are able to underwrite mortgages for business in a broad range of circumstances. 

Specialist lenders are more likely to accept larger buy-to-let property portfolios owned through the limited company. High street lenders tend to cap the number of properties that a limited company can own at around three. 

Limited company buy to let mortgage eligibility criteria

Landlords can have just one property through a limited company mortgage or can have many more. Investors who have four or more properties may find it more difficult to get a mortgage through a high street lender and usually become classed as portfolio landlords. 

Specialist lenders provide more options for portfolio landlords looking for a mortgage through a limited company. 

You'll normally require a higher deposit with limited company buy-to-let mortgages compared to standard residential mortgages. Lenders will likely require equity or a deposit of at least 20-25% (or more in some cases), but investors who have a lower loan to value (LTV) ratio will have more options.

Interest-only mortgages for buy-to-lets for limited companies may also require a higher deposit compared to repayment mortgages. 

Company directors may need a minimum income to qualify for limited company mortgages, so that lenders can be sure that void periods will be covered. However, this is not always necessary, and some lenders may accept personal savings to act in place of minimum income. 

The age of company directors may be a factor when lenders assess applicants for limited company buy-to-let mortgages and it could be more difficult to get a loan past retirement. However, there are some mainstream lenders that have no maximum age for directors as long as they are deemed to be experienced landlords and the LTV is relatively low.

Understanding limited company buy to let mortgages

Tax and buying a property through a limited company

One of the main benefits of getting a buy-to-let company mortgage through a company is that costs associated with running the buy-to-let can be deducted from earnings to reduce the overall tax bill. 

Costs that can be deducted include insurance, repairs and, crucially, mortgage interest. 

Tax changes brought in from 2017 stopped individual landlords from deducting mortgage interest to lower income tax bills, which is why more landlords started to set up limited companies for owning properties.  

And instead of paying income tax on rent earnings, limited companies pay corporation tax on profits at a rate of 19%, which is especially beneficial if you’re a higher rate taxpayer. 

For example, a limited company landlord who has £24,000 of rental income and pays £7,000 of mortgage interest will be liable for corporation tax at a rate of 19% on £17,000 (that’s (£24,000 minus £7,000). That means a tax bill of £3,230, leaving a profit of £13,770. 

A higher-rate taxpayer landlord who has the same £24,000 of income and £7,000 of mortgage interest will be liable for income tax at a rate of 40% (£9,600). They can claim tax relief at a rate of 20% on the lowest of either the finance costs, property profits or adjusted total income – in this case, the lowest amount is the mortgage interest (£1,400). This leaves a tax bill of £8,200 and a much lower profit of £8,800.  

However, there is a further tax that needs to be paid to draw down profits out of the company as dividends. Rates on a limited company buy-to-let mortgage can also be more expensive than a standard buy-to-let mortgage. 

A limited company has to pay stamp duty, with the tax also due when any properties currently owned are sold or transferred to the company. Furthermore, property held by a limited company is liable for Capital Gains Tax, and there is no tax-free allowance which individuals do benefit from. 

It is a good idea to see a tax adviser to help work through the options and whether setting up an SPV is the right option for you.

Terms and fees

When comparing limited company buy-to-let mortgages, you'll likely want to find the lowest interest rate. However, it's important to also look at other fees and the terms of the deal.

You may also have to use a specialist lender to get a buy-to-let mortgage for a limited company. It's very useful to seek expert advice from a mortgage broker, who can look at deals that would suit you and your circumstances.

Understanding limited company buy to let mortgages

Tax and buying a property through a limited company

One of the main benefits of getting a buy-to-let company mortgage through a company is that costs associated with running the buy-to-let can be deducted from earnings to reduce the overall tax bill. 

Costs that can be deducted include insurance, repairs and, crucially, mortgage interest. 

Tax changes brought in from 2017 stopped individual landlords from deducting mortgage interest to lower income tax bills, which is why more landlords started to set up limited companies for owning properties.  

And instead of paying income tax on rent earnings, limited companies pay corporation tax on profits at a rate of 19%, which is especially beneficial if you’re a higher rate taxpayer. 

For example, a limited company landlord who has £24,000 of rental income and pays £7,000 of mortgage interest will be liable for corporation tax at a rate of 19% on £17,000 (that’s (£24,000 minus £7,000). That means a tax bill of £3,230, leaving a profit of £13,770. 

A higher-rate taxpayer landlord who has the same £24,000 of income and £7,000 of mortgage interest will be liable for income tax at a rate of 40% (£9,600). They can claim tax relief at a rate of 20% on the lowest of either the finance costs, property profits or adjusted total income – in this case, the lowest amount is the mortgage interest (£1,400). This leaves a tax bill of £8,200 and a much lower profit of £8,800.  

However, there is a further tax that needs to be paid to draw down profits out of the company as dividends. Rates on a limited company buy-to-let mortgage can also be more expensive than a standard buy-to-let mortgage. 

A limited company has to pay stamp duty, with the tax also due when any properties currently owned are sold or transferred to the company. Furthermore, property held by a limited company is liable for Capital Gains Tax, and there is no tax-free allowance which individuals do benefit from. 

It is a good idea to see a tax adviser to help work through the options and whether setting up an SPV is the right option for you.

Terms and fees

When comparing limited company buy-to-let mortgages, you'll likely want to find the lowest interest rate. However, it's important to also look at other fees and the terms of the deal.

You may also have to use a specialist lender to get a buy-to-let mortgage for a limited company. It's very useful to seek expert advice from a mortgage broker, who can look at deals that would suit you and your circumstances.

How to set up a buy to let mortgage for a limited company

To apply for a limited company buy-to-let mortgage, you'll need to set up an SPV.

Setting up an SPV limited company online with Companies House is fairly straightforward and costs £12, though you can also ask an accountant to help if you would prefer. 

You will need to choose Standard Industry Classification (SIC) of economical activity codes for the company which confirm the nature of the trading.

Lenders will require these codes when processing a mortgage application and will usually be looking to make sure it has any of the following codes related to property investment: 

  • 68100 Buying and selling of own real estate

  • 68201 Renting and operating of Housing Association real estate

  • 68209 Other letting and operating of own or leased real estate

  • 68320 Management of real estate on a fee or contract basis

Once you have set up an SPV you need to register for corporation tax, which you can also do through Companies House, and you will also need to give HMRC your company’s registration number.

What is a Special Purpose Vehicle (SPV)?

A special purpose vehicle (SPV) is a company that is used for a named function only. In this case, it's exclusively for buying, selling and letting properties. 

Unlike a normal company that can carry out a range of functions, the SPV has a special structure designed specifically for owning properties. Many lenders restrict limited company mortgages to these kinds of  SPVs because they understand the structures and risks and know the money cannot be used to subsidise another activity. 

However, there are lenders who will consider mortgages for businesses run as a normal multi-purpose trading company but they are in the minority and usually more specialist. 

Landlords who use an SPV are typically professionals and are using the company as a tax-efficient way to buy and hold properties. Through these companies, a landlord can deduct finance costs, including mortgage interest, from their earnings to reduce their overall tax bill.

How to choose the right commercial buy-to-let mortgage for a limited company

If you're looking for a limited company buy-to-let mortgage, there are a few things to think about.

You'll need to decide the type of interest rate you want. Lenders offer both fixed- or variable-rate deals. The latter tends to be cheaper initially but are subject to change during the deal, which means you could end up paying more further down the line. Fixing a mortgage rate provides certainty that your payments will remain the same for the duration of your deal. 

Fixed-rate mortgages are most commonly offered for two or five years, but some lenders will allow rates to be fixed as long as 10 years. 

The type of mortgage rate you pick will affect how much you pay and whether you are protected from future interest rate rises.

Lenders also offer different mortgage terms. A longer term means your monthly repayments are lower, whereas you pay less interest over the duration of the mortgage with a shorter term. 

You'll also need to decide between an interest-only or a repayment mortgage. Interest-only deals cost less per month than a repayment mortgage. But you'll need to save up separately to pay off your mortgage or sell your property when the mortgage ends, and you'll likely need a larger deposit to be eligible for one initially.

You should consider these options before you start comparing limited company buy-to-let mortgage rates, and speak to a broker for advice on the deals that suit you and your circumstances.

Limited company buy to let mortgages offer some tax benefits, but there are generally fewer lenders to choose from. Speaking to a mortgage broker can help you work out the best option available to you.

Limited company buy to let FAQs

Can I get a limited company mortgage online?

Yes, you can apply online directly through a lender or compare through our broker B2Bfinance.

Do I need a specialist mortgage for a ltd company buy to let?

Yes, you need a BTL mortgage from a lender that accepts property investment through limited companies.

Can I get an interest only ltd company mortgage?

Yes, many deals can be taken out as interest-only or repayment mortgages.

What is the maximum age for limited company BTL mortgages?

The maximum age will depend on the deal you get. There may be no maximum age, but you should check this with the lender or with your broker.

Do I need a deposit to get a BTL mortgage?

Yes, and you need a bigger deposit for buy-to-let mortgages than for residential mortgages. Typically the minimum is 20-25%.

What are the disadvantages of buying a property through a limited company?

While there are tax benefits to purchasing a property through a buy-to-let, there are some downsides.

If ownership of an existing property is transferred to a company, then it will be subjected to capital gains tax and Stamp Duty (the amount payable will depend on the value of the property).

Your dividend profits will also be subject to tax.

There are also fewer lenders that offer this type of mortgage, compared to standard buy-to-let mortgages, so you will have less choice of deals and interest rates may be higher.

Can you get multiple buy to let mortgages with a limited company?

Yes, you can take out multiple buy-to-let mortgages through a limited company. Some lenders let you have up to five mortgages with them.

About the author

Atousa Cunnell
Atousa is a Content Producer for money.co.uk, responsible for writing and editing a wide range of mortgage content that are helpful to the reader.