Purchasing a property through a limited company mortgage can be a huge help to those looking into buying their first investment property or established landlords looking to boost their portfolio. Landlords in Northern Ireland and the rest of the UK can rely on the team at Tyrone Mortgages to provide accurate, relevant mortgage advice. Get in touch now for more information or to make an inquiry into our services.
A limited company mortgage – also known as an SPV mortgage or buy-to-let for limited companies – is a type of mortgage that is purchased by a company rather than by an individual. By purchasing through a company name instead of your own, you can better separate personal and business portfolios and expenses and receive unique tax benefits.
There are a few ways you can approach a limited company mortgage. The first is through a trading company – which has at least one primary activity other than owning property, such as manufacturing or offering some sort of service. The funds from this business activity can be used to purchase a residential property that can then be rented out.
The other option is an SPV (Special Purpose Vehicle) whose sole purpose is holding property. This works by setting up a business with Companies House, but the company does not conduct any business activity, simply purchasing a property and having rent coming in and expenses coming out under the company name. Whichever method you choose, the professional mortgage advisors at Tyrone Mortgages are here to help you every step of the way. Get in touch to find out more.
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Tax obligations can differ when purchasing property through a limited company compared to personal ownership. Instead of being taxed on rental income as personal income, a limited company generally pays corporation tax on its profits.
Corporation Tax: Limited companies pay corporation tax on their profits. As of 2024, the main rates are 25% for profits over £250,000 and 19% for profits below this amount, with marginal relief available for profits between these thresholds. Before paying corporation tax, companies can deduct allowable business expenses to reduce their tax liability.
Stamp Duty Land Tax (SDLT): Limited companies pay the standard SDLT rates plus an additional 5% surcharge on residential property purchases in the UK, including Northern Ireland. However, the surcharge does not apply when purchasing commercial properties, which may have lower SDLT rates.
Capital Gains Tax (CGT): When selling a property at a profit, a limited company does not pay CGT. Instead, gains are subject to corporation tax. Shareholders selling shares in the company may be liable for CGT on any profit from the sale of those shares.
Dividend Tax: After corporation tax is paid, shareholders can withdraw remaining profits as dividends. Dividends are subject to dividend tax at rates depending on the individual’s tax band (e.g., 8.75% for basic rate taxpayers, 33.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers).
Inheritance Tax: If a property is held in a limited company, the company shares are considered part of the shareholder’s estate for inheritance tax purposes. This may provide more flexibility in succession planning compared to direct property ownership.
The tax treatment of property ownership structures can be complex, and the applicability of reliefs and tax rates may vary depending on individual circumstances.
If you find yourself stuck between choosing a more traditional method to build your portfolio or choosing the limited company mortgage option, our team has put together several key features and benefits we believe are worth considering, such as:
Restrictions on mortgage interest relief may not apply to limited companies in the same way as for individual landlords. Rental properties owned through a limited company can sometimes have mortgage interest costs treated as a business expense, which could affect your overall taxable profit. However, the implications of ownership structures can be complex and depend on your individual circumstances.
Limited companies are subject to corporation tax on their profits, which differs from personal income tax rates that apply to individual landlords. The relative tax position of operating through a company compared to personal ownership will depend on a range of factors, including your individual circumstances, level of profit, and any available reliefs. Tax planning options and reliefs can vary, and company structures may not be suitable for everyone.
A limited company structure can offer a degree of protection for personal assets compared to personal ownership, as the company is a separate legal entity. However, certain risks, such as personal guarantees for mortgages or director responsibilities, may still impact personal finances in specific circumstances. The extent of protection depends on individual arrangements and should be carefully considered.
While both a limited company and a Special Purpose Vehicle (SPV) allow you to purchase property under a company name, there are key distinctions between the two. A limited company can engage in multiple business activities—such as trading or offering services—alongside property ownership. This gives landlords the flexibility to manage various income streams within the same company.
An SPV, on the other hand, is a type of limited company specifically set up for holding property. It does not engage in any other business activity apart from property investment and management. As a result, SPVs are often seen as more straightforward for lenders to assess, given the focus on property. SPVs typically enjoy a simpler lending process as mortgage providers are more familiar with these setups. For landlords primarily focused on growing their rental portfolio without other business activities, an SPV could be the preferred option.
However, each option has its benefits depending on your broader business objectives. For personalised advice on whether an SPV or a more general limited company is better for your circumstances, the team at Tyrone Mortgages is ready to help.
In general, mortgage interest rates for limited companies tend to be higher than those offered to individual landlords. This is largely due to the perceived higher risk of lending to a company instead of an individual. Lenders may charge a premium to offset this risk, especially if the company is newly established or if the properties being purchased carry a significant level of borrowing.
That said, the slight increase in interest rates may be outweighed by the tax advantages and protection a limited company structure offers, especially for landlords with larger portfolios. Additionally, mortgage availability for limited companies has grown significantly in recent years, leading to more competitive rates and products on the market.
If you would like to know more, or to get a FREE quote for our services, please don’t hesitate to reach out to our expert team today. Simply fill out our contact form below and we’ll be back in touch as soon as possible.
At Tyrone Mortgages, we have been offering comprehensive mortgage advice from our home in Omagh, Northern Ireland, for many years now. We cater to the whole of the UK and offer a wide range of mortgage services, including traditional buy-to-let mortgages, first-time buyer mortgages, self-build mortgages, and more. Some of the reasons our clients turn to us for our expertise include the following
Experienced Team
We have been providing valuable mortgage advisory services for years, and our team comprises industry experts. If you want professional, reliable mortgage advice from an experienced and knowledgeable team, choose Tyrone Mortgages today.
Industry Connections
We work with a wide range of lenders across the UK to find you the best deal on your mortgage—whether this is for private landlords looking to purchase through a limited company or first-time buyers who need more support getting onto the property ladder.
Friendly Advisors
Our team is here to relieve some of the stress of purchasing a property and offer support from start to finish. Our clients are more than just customers—we build lifelong relationships with everyone who chooses our services.
Deciding whether a buy-to-let limited company mortgage is the right option for you depends on several factors, including your long-term investment goals and tax planning needs. For many landlords, purchasing property through a limited company can offer significant financial advantages. The potential for lower tax rates via corporation tax, combined with the ability to offset mortgage interest as a business expense, makes this an appealing option for those looking to maximise the profitability of their portfolio.
However, setting up and maintaining a limited company requires additional administrative responsibilities, such as filing annual accounts and adhering to corporate regulations. If you’re an established landlord with multiple properties or if you’re planning to grow your portfolio over time, these extra steps may be worthwhile, given the tax savings and limited liability protection. For newer investors or those with smaller portfolios, the benefits may be less clear-cut, as you’ll need to weigh the potential tax savings against the higher mortgage interest rates and ongoing company costs.
If you would like to know more, we’re here to talk. Give us a call today or fill out one of our contact forms and we will be in touch as soon as possible. As well as limited company mortgages, we can also assist with home mover, first-time buyer, buy-to-let, and self-build mortgages, and much more too. Contact the team at Tyrone Mortgages now for more information.
Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.
