Limited Company Buy to Let
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Limited Company Buy to Let
Paul Holland talks to us about getting a Buy to Let mortgage through a limited company.
Can I get a Buy to Let mortgage in a limited company? Is it difficult?
You can get a Buy to Let mortgage through a limited company, and actually this is an increasingly popular option for landlords with various potential benefits. However, the process can be slightly more complex than to get a Buy to Let in a personal name.
It is a little more difficult, as there are fewer lenders at your disposal, and it’s more time consuming. On top of that, it’s probably going to be costly.
You might ask yourself why people would buy a property through a limited company if it is more difficult, more time consuming and more expensive, but I’m sure we’ll explain that in this podcast.
Is it worth setting up a limited company for Buy to Let?
It can definitely be worth your time, depending on the circumstances of course – as with anything mortgage related. Generally speaking, if you’re already in the higher tax bracket, or you soon could be, it’s likely to work out as more tax efficient in the long term.
If you’re always going to be in the lower tax band, and you don’t have any interest in having more than one Buy to Let property, it might not necessarily be for you.
That’s why it’s a good idea to discuss things, as everyone’s tax position and intentions are totally different. Once you explain your wants, needs and certain circumstances, it allows us to put together a sustainable strategy.
Doing this within a limited company means, realistically, it is a business. You will need a business model, and it’s all about profitability and long term sustainability. Ironing out your intentions now will prevent you making wrong choices that you might regret later on down the line.
How do I get a Buy to Let mortgage through a limited company?
There are a few main steps to take, and I would argue that this is probably the right way around to do it, but it doesn’t matter if you’ve done things differently. If you’re starting from a clean slate, I suggest following this approach.
First you need a limited company. If you haven’t got one already, it needs to be registered at Companies House and it’s usually advisable to set it up as an SPV – a special purpose vehicle. That’s solely for the purpose of owning and renting property.
There are specific SIC codes to put into the application when creating these properties: 68100, which is buying of own real estate, and 68209 which is the letting and operating of own or leased real estate.
At that point, you’ve got an SPV, so you’re ready to go from a limited company perspective. Next, you’re going to need a business bank account to handle all the incoming and outgoing money related to those properties. Then I suggest gathering documentation. Lenders are going to ask you for ID, bank statements and income proof.
Next, speak to a broker – in all honesty, if there’s one application that you really shouldn’t try and progress yourself, it’s a limited company purchase. Whatever a broker charges you is likely to be saved tenfold by using their experience and knowledge.
They’re also likely to help complete the additional documentation on submission of the application – like a business plan, a property schedule and personal guarantees.
Once you submit the mortgage application, you will select and instruct a solicitor to carry out the legal work. Try to ensure that they are experienced in limited company purchases – some will not have touched these types of transactions and it’s no good having those in your corner when trying to buy through a limited company.
At that point, you can sit back. The broker will get your mortgage offer and the solicitor will handle the contracts. Once everything’s approved and ready to go, your company will own that property upon completion.
How do limited company Buy to Let mortgages work? What’s the eligibility criteria?
You will need to have that special purpose vehicle set up. You’re going to need to pass a credit score on a personal basis. A limited company is a separate entity, but it’s just a holding or a tax wrapper. The mortgage is still going to be assessed on you personally.
Some lenders have minimum income requirements – typically £25,000 a year – but others don’t. Each lender has their own criteria around the type of property they will and won’t lend on. Most lenders insist that you already own a residential property – it’s unlikely they will accept first time landlords buying in a limited company.
Most need a personal guarantee in the background – so, although it’s a limited company, there will be some ties to you personally and it’s worth bearing that in mind. A lot of people have misconceptions around this as it’s a little different from the trading limited companies you’d operate a business from.
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How much deposit do I need for a Buy to Let through a limited company?
Generally the minimum is around 20% – and more commonly 25% – but you may well need more. The amount you can secure on a mortgage is driven by the rent the property can achieve. If the rent doesn’t allow you to borrow 75% of the property price, you’re going to need a larger deposit to bridge that gap.
It’s not as simple as saying you’ll need a 25% deposit. You might need 30% or 35%, depending on how good the rental potential is from that property.
Do limited companies pay stamp duty on Buy to Lets? What other costs are involved?
Yes, you will pay stamp duty if you purchase property. Generally within a limited company, you’re going to pay the standard rate plus a surcharge. That surcharge is currently set at 5% of the purchase price.
Let’s say you bought a £200,000 property. You’d pay your normal stamp duty on that, and then an extra £10,000. That’s true as of now, in February 2025, but stamp duty rates change all the time, so do confirm the details depending when you’re listening to this.
Other costs applied to this sort of transaction will vary. They’re likely to include broker fees, solicitors’ fees, valuation fees, product fees from the lender and potentially tax advice, as well. All those costs can build up, so budget carefully.
What are the benefits and drawbacks of owning a property through a Buy to Let limited company?
Generally the benefits of having a property within a limited company versus personally are around tax efficiency. That’s the whole point.
If you make a business more tax efficient, it’s often easier to grow it than if you were paying out more on tax. So if you’re in it for profit – and most people are, because it is a business – then it will be worth the additional work involved.
The drawbacks are mostly linked to the upfront costs and time investment. It will be more expensive to secure these products compared with a personal Buy to Let, and it will take more of your time to go through that transaction.
But with most businesses, you need to speculate to accumulate – things that drive more profit are likely to be harder to attain.
How does remortgaging a Buy to Let property work through a limited company?
All those nuances of taking out a mortgage are likely to be the same when you remortgage a Buy to Let property in a limited company.
But remortgages are always going to be that little bit easier than purchases because you’re removing the additional parties involved. There’s no vendor of the property. It’s just moving the mortgage from one lender to another.
There will be legal work, but it generally should be an easier, more straightforward transaction than a purchase.
How can a mortgage broker help?
The biggest thing here is the business plan. A lot of people are hearing about the benefits of Buy to Lets via a limited company. It’s a hot topic right now, and there’s a good chance it’s going to be better to buy in a limited company. However, there are lots of differences that need to be factored in.
It’s not just a case of buying a property because it’s a good investment. This is a long term strategy. Having an exit plan and knowing your long term intentions are key. Make sure that you’ve got the right plan in place and a good broker with experience in limited company purchases.
We can’t see into the future, but we can strategise with you around how you intend to grow as a landlord – whether that’s one property or 50 properties. Having an expert on your side will be really helpful for you, and you’ll get to that end goal a great deal quicker, in my opinion. This is one of the more complex mortgage situations, so get the right advice.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
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