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Author: Carl Shave-Director
Updated on January 30th, 2024

Limited Company Buy-to-Let Mortgage Advice

You can purchase and manage your Buy-to-Let property either with an individual mortgage or a limited company mortgage. The decision will affect the revenue you can expect, so picking the right type of Buy-to-Let mortgage will be down to your individual circumstances.

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There have been recent changes to the rules around tax relief on mortgage interest on Buy-to-Let properties. There has also been an increase in Stamp Duty on second homes. Therefore, many landlords have concluded that running a limited company Buy-to-Let business could be the better financial option.

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What is a Limited Company Buy-to-Let mortgage?

This is where an individual will take out a mortgage through a limited company, rather than in their own name.
In 2016, there were changes to the tax relief on Buy-to-Let mortgages and Stamp Duty. This made growing a property portfolio generally more expensive for most. So, landlords may have considered registering their Buy-to-Let business as a limited company.

Using a limited company offers tax relief and efficient income structuring. A limited company Buy-to-Let mortgage is almost identical to the conventional Buy-to-Let mortgage, but the important difference lies in how they assess your suitability for the loan. Mainstream lenders typically shy away from lending to a limited company as the perceived risk is higher.

However, as more landlords begin to structure their business this way, more and more specialist lenders appear. These lenders take a broader view and consider many aspects of your circumstances. They’ll consider things such as personal financial history and income to make a realistic assessment.

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Fill out our quick and easy Buy to Let mortgage calculator below. We only require a few details to see how much you may be able to borrow.

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What’s the benefit of a limited company Buy-to-Let mortgage?

You don’t need a portfolio of properties to benefit from this type of mortgage. Any income from your property goes into the company and you will pay corporation tax on the profits made.

If you can leave all the profits in the company, corporation tax will be the only tax you pay on the income which can represent a significant saving compared to the rental revenue being viewed as personal income.

Is this type of mortgage hard to find?

It is much easier now than in previous years. Because as the demand for this type of mortgage has increased, so has the range of products available.

We are a specialist mortgage broker with many years of experience dealing with niche-market products. Therefore, we will know exactly which lender will be able to offer you the right deal for your circumstances.

Can I get a Limited Company Buy-to-Let property?

Yes – anyone can use a limited company to purchase a Buy-to-Let property. Although there are obstacles, one being the criteria stipulated by each lender, the fact that it’s a specialist type mortgage makes the number of options open to you limited.

What’s the limited company Buy-to-Let mortgage criteria?

The criteria are like that of a standard Buy-to-Let. The lender will assess the anticipated rental income, as well as the property itself, and then make an offer of typically between 75%–85% of the property’s value.
When using a limited company, you will have to set it up with a specific Standard Industrial Classification (SIC) code. This stipulates that the company can only perform the activities of buying and renting property. The codes applied will be:

  • 68100: Buying and selling own real estate
  • 68209: Other letting and operating of own or leased real estate
  • 68320: Management of real estate on a fee or contract basis

Advantages of a Limited Company Buy-to-Let

  • As discussed above, the main advantage is tax efficiency. Any money you draw out of the business will be viewed as personal income and taxed at the prevailing rate. Any profits left in the business can be used for refurbishments, fees, or further property acquisitions.
  • As you are the company director, you choose what you do with the business profits. You can save them, pay them out through dividends, or reinvest them.
  • Expanding the business is made easier. As you are more tax efficient, you may have more capital to reinvest into another Buy-to-Let property. Therefore, you could grow your portfolio quicker when compared to a standard Buy-to-Let.

Disadvantages of a Limited Company Buy-to-Let

  • For some, it might be slightly more complicated to set up a Buy-to-Let mortgage for a limited company. However, with the right preparation, you shouldn’t need to worry.
  • There are not that many Buy-to-Let mortgages for limited companies available on the current market. Since not all lenders are happy to lend to all borrowers using this structure, this means interest rates on these products are usually higher.
  • You will face additional administration costs, such as the preparation of accounts and company/corporation tax calculations for HMRC. You’ll also need to register to Companies House. There could also be legal fees and costs for annual auditing, if applicable.

Can I get a Limited Company Buy-to-Let mortgage with Bad Credit?

It will be more of a challenge, but it is indeed possible. The lender will apply their own criteria and consider the applicant’s current financial situation. They will assess your ability to make repayments and the anticipated rental revenue of the property to come to a judgement.

Any adverse credit event is likely to have some impact, although a few missed payments on a store card three years ago will carry far less weight than a mortgage default in the last 12 months.
Talk to one of our specialist Buy-to-Let or Bad Credit advisers who can assess your circumstances and requirements and recommend options that will suit you best going forward.

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What is a Special Purpose Vehicle (SPV) for Buy-to-Let?

It’s a limited company set up for the sole purpose of buying and administering Buy-to-Let properties. In effect, a limited company with restricted trading. An SPV is a way for landlords to ensure their income is as tax-efficient as possible.

Can I set up a new SPV to purchase a Buy-to-Let property?

Yes, it is possible for anyone to do so as there are no real barriers. The question should be: would an SPV be the most suitable strategy for your individual situation? A conversation with one of our specialist advisers would be able to shed light on the best route for you. However, you should also consult your accountant and possibly obtain legal advice.

As long as your new SPV is established with the correct Standard Industrial Classification (SIC) code, then mortgage lenders should find it suitable to consider for a mortgage application.
During the actual mortgage application, the company director(s) will be subject to the lender’s credit scoring test. This is because your SPV is a new company and will have no credit history of its own. The director(s) will also need to show proof of private income to establish an underlying level of affordability.

SPV or a Trading as a Limited Company?

SPVs (Special Purpose Vehicles) are set up for one purpose: to administer all the financial activities and cash flow around your Buy-to-Let property business.

As with any other limited company, you can draw a nominal income. This would be declared for personal income tax reasons and then you would retain the rest of the profits within your SPV. This can be used for property maintenance, renovations, and possibly reinvested in expanding your portfolio.

If your limited company starts to receive income from other sources, then it will be considered a trading company.

It is worth noting that many mortgage lenders will only be willing to extend a Buy-to-Let mortgage to an SPV. Introducing other business interests, income streams, and channels for possible expense into your company could be perceived as higher risk.

Any other considerations when setting up an SPV?

Your SPV does not have to be a new entity, you can change an existing trading company into an SPV. This is done by stating that it will now only be used for your Buy-to-Let property business.

Another option is to create a new company especially for this purpose with no prior trading record. Some lenders will prefer the latter, as it dispels any potential risks, however small, that the company may carry from any previous trading activity.

The lender’s assessment criteria to obtain a Buy-to-Let mortgage will vary from one lender to the next. Many will take the director’s personal financial history into consideration and require the director to personally guarantee the loan.

You might think the process of setting up an SPV would be a bit of a rigmarole, but it is surprisingly straightforward and inexpensive. It’s possible to register your company at Companies House online for a cost of only £12*. The process should then be complete in 24 hours.

To trade as a Buy-to-Let business and obtain a mortgage under this structure, your company will need to get the appropriate Standard Industrial Classification (SIC) code. Most lenders will require your SPV to have the correct SIC for performing the activities of buying and renting property. The appropriate codes are:

  • 68100: Buying and selling own real estate
  • 68209: Other letting and operating of own or leased real estate
  • 68320: Management of real estate on a fee or contract basis

*Price correct at the time of writing – October 2023

Limited Company Buy-to-Let mortgage rates

Limited company Buy-to-Let rates will vary from one lender to the next. Although this is still a growing market, lenders and products are still narrower than that for personal Buy-to-Let mortgages.
Interest rates depend on:

  • the loan-to-value ratio,
  • level of equity or deposit you can supply,
  • and the length of any fixed rate period term.

With demand increasing and more lenders entering the market, rates will be constantly changing to respond to competition. Our expert advisers will be able to take you thorough each step of the application and quickly advise you of the best lenders to suit your circumstances.

Limited Company Buy-to-Let mortgage lenders

There is not a best limited company Buy-to-Let mortgage lender. This is because the best deal for you will be based on your individual circumstances.

The lenders who offer Buy-to-Let mortgages tend to operate in a very niche area of the industry. Therefore, they are only accessible through a broker or adviser.

The good news is the number of lenders is growing, as more people recognise this way for landlords to structure their business.

Mortgage advice for Limited Company Buy-to-Let

Due to its niche, advice for obtaining a Buy-to-Let mortgage as a limited company is a specialist undertaking. You will need to speak to advisers who have a lot of experience and knowledge in all the products available.

Our expert advisers are available for free, no-obligation consultations where we can review your circumstances. This will let you know what the best options for a limited company Buy-to-Let mortgage available to you are. Get in touch with us today.

Limited Company Buy-to-Let FAQs

  • What SIC Codes do I need for the Limited Company?
  • Can I use my existing limited company?
  • How many properties can I hold within a limited company?
  • Do I need to set up my limited company before I can apply for an Agreement in Principle?
  • Can I transfer my property from sole ownership to my limited company?

These are the four SIC codes that relate to property letting:

  • 68100: Buying and selling 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

Lenders usually vary in what they require, but generally, they would expect your Buy-to-Let limited company to be registered under 68100 or 68209.

The majority of Buy-to-Let mortgage lenders prefer you to work through a Special Purpose Vehicle (SPV) rather than a limited company that carries additional complications and potential external risks associated with business not connected to your property.

This will usually mean you have to set up a new limited company as an SPV. It will be exclusively dedicated to running your Buy-to-Let business, with the appropriate SIC code for letting property.
If you already have a limited company that you are determined to use, then a lender may accept this as long as there are no other revenue streams going through the business. However, the number of lenders that will do so is limited.

You will be pleased to know there’s no limit to the number of properties.

Running a multiple property Buy-to-Let business in this way can be beneficial for portfolio landlords who are looking for maximum tax efficiency.

Some lenders don’t need you to have already incorporated your business before getting an Agreement in Principle on a limited company. However, you are likely to be in a stronger position with your application if you have already set up your company.

It is indeed possible for you to transfer ownership of your Buy-to-Let property to your limited company. However, it does throw up a little complication and some extra costs.

To do so, you’ll need to sell your property as an individual and then buy it with the limited company, potentially exposing you personally to Capital Gains Tax on the sale and the limited company to Stamp Duty on the purchase.

You should weigh up both the pros and cons and seek professional advice before making a final decision.

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