Limited Company Buy to Let

Should you buy to let in a limited company or personal name?

In this article we look at whether you should buy a property in a limited company name or personal name. With a huge increase in demand for limited company buy to lets we have seen a massive increase in the number of products being offered and the lenders looking to get a slice of this market.

Why are landlords using limited companies?

The simple answer is they are paying less tax.

Changes announced in the government’s 2015 Budget mean that by next year landlords, especially those who are higher or additional rate taxpayers, can only claim tax relief for mortgage interest at the basic rate of 20%. These changes have been phased in since April 2017. Landlords who are not operating as a limited company could pay more tax on the rental income they receive.

The additional changes to corporation tax rates have made limited company structure even more attractive with tax on trading profits rates dropped from 20% to 19% from April 2017, and to 17% from April 2020. These new rates apply to limited companies with profits up to £300,000 per year.

Do you pay stamp duty on limited company buy to let purchases?

Yes you pay the standard rates that apply plus a 3% surcharge.

This is the same as your personal name or anyone buying a second home.

Visit the Stamp Duty Land Tax page for more details.

What is an SPV Limited Company

Companies that are set up to trade only in rental property are known as Special Purpose Vehicle or SPV limited companies. They are classified in differently by lenders, according to the Standard Industry Classification or SIC code for short, registered at companies house.

These include:

68100 – Buying & sell own real estate
68201 – Renting & operating of housing association real estate
68209 – Other letting & operating of own or leased real estate
68320 – Management of real estate on a fee or contract basis

For companies who’s sole purpose is classed as SPVs, obtaining a buy to let mortgage is now more straightforward than for firms trading as other SIC categories.

Are the mortgage interest rates different from personal buy to let rates?

Lenders have different product ranges for personal and company buy to lets. There used to be a big difference in the interest rates with limited company rates being higher and a restricted range of lenders. But with the increased demand for products and lenders better understanding and limiting their risk the gap between the rates is getting smaller and smaller.