Ltd Company Buy To Let Mortgage: The Complete Investor’s Guide to Limited Company Mortgages

Limited Company Buy-To-Let Mortgage: The Complete Investor’s Guide

Ltd company Buy to Let mortgage, what are they and who can use them. As the landscape of property investing continues to evolve in the UK, more landlords are turning to limited company buy-to-let mortgages as a tax-efficient and scalable solution. Whether you’re building your first portfolio or expanding an existing one, purchasing property through a limited company structure offers a range of financial and strategic advantages.

Limited company buy-to-let mortgages are increasingly popular for property investments, especially among those aiming to grow and manage a property portfolio efficiently.

This guide will help you understand how limited company buy-to-let mortgages work, how they differ from personal buy-to-let loans, the tax benefits, who they’re most suitable for, which SIC codes are required, and which lenders are active in this market. We’ll also explore the common challenges, lending criteria, and the vital role of a specialist mortgage broker.

What Is a Limited Company Buy-to-Let Mortgage?

A limited company buy-to-let mortgage is a mortgage used to purchase a rental property through a limited company, rather than in your own name. Most lenders prefer the company to be a Special Purpose Vehicle (SPV), a business entity set up solely to hold and manage property. In many cases, a company set up specifically for property investment is required to meet lender criteria.

The property is legally owned by the company, and the mortgage contract is in the company’s name. However, most lenders require personal guarantees from the directors, which means you are still financially responsible if the company defaults.

This structure is particularly beneficial for landlords looking to benefit from corporation tax rates, reinvest profits more efficiently, or build a long-term portfolio with flexible ownership options.

Limited Company vs Personal Buy-to-Let: What’s the Difference?

The key difference lies in who owns the property and how profits are taxed.

With a personal buy-to-let mortgage, you own the property in your own name, and the rental income is added to your personal income. You pay income tax on those profits, and the ability to deduct mortgage interest has been significantly reduced under current tax rules. For an individual buy to let, mortgage lenders typically assess rental income coverage and deposit requirements in a similar way to limited company applications.

By contrast, with a limited company buy-to-let mortgage, the property is owned by your company, and rental profits are subject to corporation tax (currently 25% for most businesses). Crucially, your company can still deduct full mortgage interest as a business expense, which can result in significant tax savings especially for higher-rate taxpayers. Lenders will assess rental income and affordability in the same way for both individual and limited company applicants.

It’s important to note that residential mortgage products have different terms and tax implications compared to buy-to-let mortgages, whether the property is owned by an individual or a company.

The Benefits of Buying Property Through a Limited Company

There are several reasons why landlords and property investors choose to invest via a limited company structure:

1. Improved Tax Efficiency

Using a company allows you to fully offset mortgage interest and running costs, reducing your taxable profit. The company then pays corporation tax, which is typically lower than personal income tax, especially for investors in the 40% or 45% tax bands.

2. Easier to Reinvest Profits

Instead of withdrawing profits and paying personal tax, landlords can retain earnings within the company and use them to purchase additional properties, allowing more efficient portfolio growth.

3. Better for Portfolio Landlords

Those with multiple properties benefit from the simplified management, easier accounting, and shared ownership structure a company offers. It also makes succession planning and shareholder agreements easier to implement.

4. Personal Liability Control

Although directors provide personal guarantees, owning property via a company can offer limited liability and keep personal and business finances distinct.

Setting Up a Limited Company for Buy-to-Let

Setting up a limited company for buy-to-let property investment is a strategic move that can offer significant benefits, but it’s important to approach the process with care. A limited company structure can provide advantages such as reduced income tax and capital gains tax liabilities, as well as limited liability protection for directors and shareholders.

To get started, you’ll need to register your company with Companies House, which involves choosing a company name, appointing at least one director, and providing details of shareholders. Once registered, your company will receive a Unique Taxpayer Reference (UTR) from HMRC, which is essential for tax purposes. You’ll also need to open a dedicated business bank account to keep your company’s finances separate from your personal accounts, and ensure you have any necessary licenses or permits for letting property.

It’s highly recommended to seek professional tax advice before setting up your company. An experienced adviser can help you structure your business in the most tax-efficient way, ensure you’re making the most of available tax benefits, and keep you compliant with all relevant regulations. Taking these steps at the outset will help you maximise the benefits of your limited company buy-to-let investment and avoid costly mistakes down the line.

Which SIC Codes Should You Use for a Property SPV?

When setting up a limited company to hold rental property, selecting the correct SIC code (Standard Industrial Classification) is essential. Lenders use SIC codes to determine whether your company qualifies as an SPV.

Here are the most commonly accepted SIC codes for property investment:

For most limited company buy-to-let mortgages, lenders prefer the company to be classified under 68100, especially if it is newly formed and hasn’t traded in any other area.

If you’re repurposing an existing company that previously engaged in other activities, you may need to set up a new SPV with a clean structure and correct SIC codes to be eligible for mortgage products.

Who Should Consider a Limited Company Buy-to-Let?

This approach is particularly well-suited to:

• Higher-rate taxpayers looking to reduce personal income tax liabilities.

• Experienced landlords expanding a buy-to-let portfolio.

• Property investment partnerships or joint ventures.

• Investors focused on long-term gains and portfolio growth.

• Landlords building a business, not just buying one or two properties casually.

While limited company mortgages are more complex, the benefits can be significant for those with the right investment goals and tax profile.

Key Considerations and Challenges

While the advantages are clear, there are a few important caveats:

• Higher mortgage rates: Interest rates for limited company buy-to-lets are generally higher than personal buy to lets.

• Fewer lenders: Although the market is growing, fewer mainstream lenders offer limited company products.

• Higher legal and setup costs: The cost of setting up and financing a limited company for property investment includes company formation, annual accounts, and possibly higher legal fees.

• Stamp duty and capital gains: Transferring a personally owned property into a company is treated as a sale and may trigger both stamp duty (stamp duty land tax) and CGT.

When transferring a personally owned property into a company, the property must be purchased at its market value, which is treated as acquiring a new property for tax purposes. Stamp duty land tax and capital gains tax must be paid on the transaction.

It’s vital to seek tax advice from an accountant before choosing this structure, especially if you’re thinking about transferring existing properties.

Capital Gains Tax Allowance and Limited Companies

When it comes to capital gains tax, limited companies are subject to different rules than individual landlords. Unlike individuals, limited companies do not benefit from a capital gains tax allowance when selling a property. Instead, any profit made from the sale of a buy-to-let property is subject to corporation tax at the prevailing rate.

While this means limited companies miss out on the personal capital gains tax allowance, they can still benefit from tax relief on mortgage interest and other allowable expenses, which can help reduce the overall tax bill. Individual landlords, by contrast, receive a capital gains tax allowance (currently £12,000 for the 2022-2023 tax year) and pay capital gains tax only on profits above this threshold.

Given these differences, it’s essential to seek professional tax advice to understand how capital gains tax will impact your limited company buy-to-let investment. A qualified adviser can help you navigate the rules, ensure you’re claiming all available tax reliefs, and structure your property transactions in the most tax-efficient way for your business.

What Do Lenders Look For?

When applying for a limited company buy-to-let mortgage, mortgage applications are assessed based on the company’s financial history and the directors’ personal guarantees. Lenders typically assess the following:

• The company must be a registered SPV with the correct SIC codes.

• The minimum deposit is typically 25% of the property’s value.

• Rental income must meet the interest coverage ratio (usually 125–145% of the mortgage payment at a stressed rate).

• Directors’ credit history and financial background are reviewed.

• A personal guarantee from the directors is almost always required.

Some lenders also prefer directors with previous landlord experience, although a few are open to first-time landlords with strong financial backgrounds.

Lenders offer mortgages with a variety of mortgage terms, and each mortgage application is assessed on its own merits.

Buy to Let Mortgage Rates and Limited Companies

Interest rates and fees for limited company buy-to-let mortgages can differ significantly from those available to individual landlords. Generally, limited company buy-to-let mortgage rates are slightly higher, and you may encounter additional fees compared to standard buy-to-let mortgages. This is because lenders view company buy-to-let loans as higher risk and often require more complex underwriting.

However, the market is competitive, and some lenders offer attractive rates and terms for limited companies, especially if you have a strong credit history or are seeking a larger loan. It’s important to compare offers from different lenders, as rates, fees, and lending criteria can vary widely.

Working with a mortgage broker who specialises in limited company buy-to-let mortgages can be invaluable. They can help you navigate the available options, secure the most competitive rates, and ensure your mortgage application is structured to meet lender requirements. By shopping around and seeking expert advice, you can find the best mortgage deal for your limited company investment.

High Street Lenders Offering Limited Company Buy-to-Let Mortgages

Although most limited company BTL mortgages are offered via intermediaries, a handful of high street names are active in this space. In recent years, more lenders have entered the market, increasing competition and providing investors with greater choice for limited company buy-to-let mortgages.

These lenders typically restrict access to broker-only products, so working with a mortgage adviser is essential.

Specialist Lenders for Limited Company Buy-to-Let

Specialist lenders dominate the limited company mortgage space, offering greater flexibility on structure, experience level, and property types. Specialist lenders provide a wide range of limited company mortgage options tailored to different investment strategies.

Some specialist lenders offer a low rate for qualifying applicants, making these products attractive for refinancing or expanding property portfolios. In addition, certain lenders are willing to provide mortgages to trading companies as well as SPVs, broadening the eligibility criteria for limited company buy-to-let finance.

These lenders are not accessible directly, applications must be made through a specialist mortgage broker.

Limited Company Buy-to-Let and Property Management

Managing a buy-to-let property through a limited company brings its own set of responsibilities and opportunities. As a company buy-to-let investor, you need to ensure that your rental income is sufficient to cover mortgage payments, ongoing expenses, and any tax liabilities. Accurate record-keeping is essential, as you’ll need to maintain detailed accounts for both Companies House and HMRC.

Compliance with property regulations is also crucial. This includes adhering to health and safety standards, ensuring proper tenancy agreements, and keeping up with any changes in landlord legislation. Many limited company landlords choose to work with a professional property management company to handle day-to-day operations such as tenant sourcing, rent collection, and property maintenance. This can help streamline your investment, reduce administrative burdens, and ensure your property is managed efficiently.

Seeking advice from property management experts can help you maximise returns on your limited company buy-to-let investment, stay compliant with all regulations, and free up your time to focus on growing your property portfolio.

Why You Should Use a Mortgage Broker

Limited company buy-to-let mortgages are more complex than traditional residential loans. Working with a mortgage broker who specialises in landlord finance can save you time, money, and risk.

A broker will:

• Help structure your company correctly from the start

• Advise on the most suitable SIC codes and legal setup

• Identify lenders that match your business model

• Source the best mortgage deals including exclusive offers

• Navigate dual applications and multi-property purchases

Brokers also coordinate with solicitors, accountants, and underwriters to ensure a smooth process from application to completion.

Final Thoughts

A limited company buy-to-let mortgage can be a smart way to build a profitable and tax-efficient property portfolio. While the setup is more complex and requires careful planning, the long-term benefits particularly for higher-rate taxpayers and full-time investors often outweigh the added costs.

Before taking the plunge, speak to both a specialist mortgage broker and a qualified tax adviser. The right structure could significantly improve your investment returns, tax position, and ability to scale your portfolio in the years to come.

Get help from an experienced mortgage broker

You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.

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