Buying A Property Through A Limited Company

Buying to let can be incredibly profitable, whether it is your sole revenue stream or if it acts as an additional source of income alongside your day job.


However, there are ways in which these profits can be maximised further. One such method comes in the form of limited company buy-to-let. Although this may sound a bit daunting at first, buying a property through this business structure actually comes with copious benefits, and the process is more straightforward than you may think.

Limited company buy-to-let: the benefits

The main advantage of buying a property through a limited company is the tax benefits that counteract the April 2017 restrictions to mortgage interest tax relief.

These changes have meant that buy-to-let (BTL) purchasers can now only claim on 75% of their mortgage interest, and receive a tax credit restricted to the basic rate (20%). It is anticipated that by 2019 they will only be able to claim on 50% and, by the 2020/21 tax year, landlords will not be able to deduct this cost at all from their rental income.

When you buy-to-let as an individual, you are taxed based on the total rental income at a 40-45% rate. However, if you buy-to-let through a limited company, then you are taxed based on the company’s profit. This means that you pay corporation tax on the rental income, which currently stands at 19% but will be lowered to 17% in 2020.

For expats whose total UK income places them within the higher or additional Income Tax brackets, this way of purchasing a property will be particularly beneficial.

Limited company buy-to-let also results in the rental profits being able to be retained within the company. This means that BTL purchasers could expand their property portfolio; without being subject to Income Tax, they have more cash to re-invest. If these rental profits were extracted through a salary, however, then Income Tax would apply.

Setting up a UK limited company

BTL investors are often reluctant to form a limited company because they anticipate that it is difficult, but it is actually quite the opposite. We recommend registering online through Companies House. It only costs £12, and the information required is minimal: the company name, address, details of a minimum of one director and shareholder, as well as the right SIC code which establishes what the company does.

Although directors are not required to be a UK resident (which is particularly advantageous to expats), the company needs to be registered in the UK in order to benefit from the lower tax payments.

Historically, it has been challenging to obtain a buy-to-let mortgage because lenders were not typically specialists in this area. However, they are now responding to an ever-changing market.

Lenders do have a preference towards special purpose vehicles (SPVs): a company that has been established solely to manage a property. This is because they are easier to understand, and thus easier for underwriting.

Mortgage finance for a limited company buy-to-let investment is actually easier to acquire than you might have first thought, especially if you work with the right specialist broker. Liquid Expat Mortgages can provide advice and support with these particular loans. Enquire today to request a free quote from our experts.