Limited Company buy-to-let Mortgage
Scott West explains how getting a buy-to-let mortgage through a limited company works.
Can you borrow through a limited company, and is it harder to arrange?
You can. Holding buy-to-let property in a limited company is now the common route for many investors, and most buy through a Special Purpose Vehicle, or SPV.
An SPV is simply a company set up to hold property and nothing else. The process is not inherently harder, but it changes the field of lenders. Some lenders are comfortable with limited companies; others are not, so we work with a different set of banks.
High Street lenders, as a rule, do not offer this. From your side that makes little practical difference. It changes the work we do on ours.
How do limited company buy-to-let mortgages work, and who qualifies?
Eligibility looks much like buying in your personal name. One distinction is proof of income, which is not necessarily required for a limited company. A company is treated as its own legal entity, so it carries no personal income requirement, whereas a personal application often calls for a £25,000 basic income from a source other than property.
You will generally need clean credit and a business plan for the property. Those apply whether you buy through a company or in your own name. Rental income and stress testing can work out more favourably through a company. If you are a higher rate or additional rate taxpayer, the personal calculation tends to be demanding.
Because a company pays corporation tax, currently between 19% and 25% depending on profits, the rental calculation can read more favourably, and the amount you can borrow through a company can be higher as a result.
How much deposit do you need through a limited company?
The standard is 25%, though a few lenders will lend to 80%. Those higher-leverage options carry higher rates and arrangement fees, but they exist if your deposit is genuinely constrained.
As ever, a larger deposit tends to bring a lower rate. We tend to see break points at Loan to Value ratios of 75%, 65% and 50%. Moving your deposit from 25% to 35% usually improves the rate, and reaching a 50% deposit lowers it materially.
Is it worth setting up a limited company for buy-to-let?
In almost all cases, yes, though you should take this to an accountant, because your own circumstances carry caveats.
If you are in a position to buy property, a company is often the right structure for tax purposes, and it brings advantages that personal ownership does not.
Within a company you can offset mortgage interest against profit; in your personal name you cannot.
On a personal buy-to-let, if you earn £10,000 a year in rental income, HMRC taxes that at your marginal rate, perhaps 40% or 45% on the £10,000, even though the mortgage is paid out of it. At 40% you are left with £6,000 before the mortgage, so the residual profit is modest.
Within a company the order reverses. On the same £10,000, you pay the mortgage first. Say that is £4,000, leaving £6,000 of profit. You then pay 25% on the £6,000, which is £1,500.
In that deliberately crude example, the difference in tax is £1,000.
Do limited companies pay stamp duty on buy-to-let, and what else does it cost?
They do, including the 5% additional property surcharge that applies to company purchases, raised from 3% in October 2024. Buying in your personal name when you own no property at all might qualify you for the First Time Buyer's allowance.
A company cannot use that. Even where you hold no property personally, the company is its own legal entity and does not qualify for a personal allowance, so it pays the full additional property surcharge on any purchase.
Other costs include incorporation, where setting up a company runs to around £50. You will file annual accounts with Companies House and a tax return with HMRC, so you will want an accountant, which costs a few hundred pounds at least.
Mortgage rates are now broadly similar for personal and company purchases. The difference tends to sit in the fees: some lenders charge a percentage arrangement fee, while personal lenders more often use fixed fees.
That has shifted over the last couple of years as interest rates rose alongside inflation, and lenders have been inventive with their products. As a general guide, you may find slightly higher fees through a company.
What are the benefits and the risks of holding buy-to-let through a company?
The principal benefit is tax efficiency. You need not draw all the income out and can retain profit within the company. The company pays corporation tax, rather than you potentially paying 45% tax or 40% personal tax.
There is also limited personal liability. A mortgage in your personal name leaves you personally liable. Taken in a company, the debt sits with the company. If the property fails and payments stop, the lender repossesses from the company.
It does not affect your personal credit directly, because the company owns the debt, though there are still implications and you will declare it on future applications.
One important caveat: lenders almost always require directors' personal guarantees on limited-company buy-to-let borrowing, so the company wrapper does not remove your personal exposure to the debt.
Some investors value that limited liability and find it more comfortable. A growing portfolio can also be easier to run. Across multiple properties, some larger lenders will aggregate the lending over the whole portfolio, which makes valuations, legal work and refinancing more cost effective.
On the other side, the lender pool is slightly smaller. Many High Street lenders will not lend to companies, and you will need an accountant to file your accounts each year.
If you hold a full-time job and draw income, your accountant will likely handle your personal tax return as well, since you may take dividends alongside company income. There is a little more administration, but on balance the weight sits firmly on the benefits.
How do you arrange a buy-to-let mortgage through your company?
First, set up an SPV with the correct SIC codes. SIC stands for Standard Industrial Classification: a code that tells everyone what the company does. For property, the codes begin with 68, common examples being 68100 or 68209. There are four or five of them. Your accountant will set this up, or you can do it yourself.
Next, speak to a broker who can find the right lender and structure for your acquisition, help you set up the limited company and work with you on a business plan.
From there it is a standard mortgage process. We submit a Decision in Principle, move to full application, arrange the valuation and the legal work, and aim to reach completion within six to eight weeks.
How does remortgaging a company-held buy-to-let work?
Assuming you already hold the property through a company and are approaching the end of your term, the process closely mirrors a purchase.
You come to a broker, we review the property and its rental income, and we research the right lender on cost and other factors. You may be looking to raise capital. You may be cost sensitive and focused on the rate.
You may want a lender to support you over the long term as the portfolio grows; a larger bank may take a more holistic view of it. We handle that, and the process runs as before. We submit a Decision in Principle, move to full application, arrange the valuation and legal work, and proceed to completion.
How does a broker help with this?
A broker is essential on these more involved transactions. The lenders concerned are almost always broker-only, and you will not be able to approach most of them directly.
We add value by working on your business plan, structuring your portfolio for growth or for equity release, and matching the right product and lender to your five and 10 year goals. We also manage the application, valuation and legal work, which removes a good deal of friction.
Your property may be repossessed if you do not keep up with your mortgage repayments.
Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.
For specialist tax advice, please refer to an accountant or tax specialist.
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