THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

What is a limited company buy to let?

It is a mortgage you can use to buy investment properties through a limited company instead of in your own name.

Buying a property through a limited company is now cheaper for some landlords, as the laws on buy to let taxation have made investing in property more expensive.

Where can you find a limited company BTL mortgage?

You can compare individual deals using our limited company buy to let mortgages comparison.

How does it work?

When you invest in property, the buy to let mortgage is usually in your own name.

One alternative is to buy investment properties through a limited company.

Technically, the company owns the properties, and the mortgage is taken out in the company's name.

You do this by setting up a special purpose vehicle (SPV) limited company, which is technically a small business set up in your name.

You pay money into the company, which is used as the deposit when you purchase properties. A limited company buy to let mortgage covers the rest of the property's price.

You need to set up the company before the mortgage begins. But you can apply for the mortgage before this, and there is no minimum time your limited company has to be trading for.

Are they better than standard BTL mortgages?

  • Could save you money in tax

  • Keep your own finances separate

  • Claim mortgage interest as a business expense

  • Initial setup costs

  • Extra paperwork and admin

  • Limited company BTL mortgages can be more expensive

Normal buy to let mortgages are taxed as part of your own personal income. This means you pay capital gains tax (CGT), and tax on the income you make from rent.

The advantage of a limited company buy to let is that you pay corporation tax instead, which can work out cheaper for some investors.

Corporation tax is charged at 19% (changing to 18% in 2020), and companies can claim mortgage interest as a business expense. You still usually have to pay stamp duty on a limited company buy to let.

How much could you save?

Below is an example of how much tax you'd pay and how much profit you could make from renting out a house with:

  • A normal buy to let mortgage

  • A limited company buy to let mortgage

This example assumes:

  • 12,000 annual rental income (1,000 per month)

  • A 200,000 interest only mortgage

  • 3% mortgage interest rate per annum fixed

  • You are a higher rate taxpayer (40% income tax in 2018/2019)

  • 2018/2019 corporation tax is charged at 19%

  • No other fees or costs are taken into account - just tax, mortgage interest and rent

 Normal BTLLimited company BTL
Rental income12,00012,000
Mortgage interest6,000 (Mortgage balance x 3%)6,000 (Mortgage balance x 3%)
Taxable profit9,000 (Rental income minus half of the mortgage interest)9,000 (Rental income minus half of the mortgage interest)
Tax due*3,600 (Taxable profit x 40%)1,140 (Taxable profit x 19%)
Net profit2,400 (Rental income minus mortgage interest and tax due)4,860 (Rental income minus mortgage interest and tax due)
*Your tax band depends on your individual financial circumstances.

How do you choose a limited company BTL?

How much do they cost?

They usually cost more than normal buy to let mortgages because:

  • Interest rates are sometimes higher for limited companies

  • Lenders sometimes charge higher arrangement fees to cover the extra paperwork

  • Some lenders make you get independent legal advice first

Keep your costs as low as possible by comparing mortgages and choosing the best deal.

Which one should you get?

You can only buy investment properties with a buy to let mortgage, not a normal residential mortgage. But if you want to buy a property through an SPV, some buy to let mortgages aren't suitable - you have to find one that accepts limited companies.

You can find a mortgage using our limited company BTL comparison. All the deals can be used for limited company property investment.

How do lenders check your affordability?

When buy to let mortgage lenders decide if they can offer you a mortgage for the amount you want, they look at:

  • If you can afford the repayments

  • If the rent you'll receive is high enough

  • If the property is worth the sale price you agreed with the seller

As you'll be registered as director of the limited company, the lender checks your own income, credit history and how you handle your finances. This is the same process as when you get a mortgage for your own home, but lenders can often let you borrow more for buy to let.

The rent you'll be able to charge on the property usually has to be around 125% of the monthly payment on the mortgage. For example, if your mortgage costs 600 per month, you would need to be able to charge 750 in rent.