We have access to lenders who provide limited company buy to let mortgages.
We have access to lots of lenders that provided limited company buy to let mortgages
Using a Limited Company for Buy to Let Properties
If you are considering investing in Buy to Let properties through a Limited Company, it is
important you understand the advantages, disadvantages and responsibilities associated with
company ownership before making a decision. We would certainly suggest that advice is taken from
a financial and legal point of view before proceeding.
Should you set up a Limited Company for your Buy to Let properties?
There is not a straightforward answer to this question. For each case, the response could differ
depending on personal circumstances, future intentions, and the availability of mortgage finance to
Limited Companies for the purchase of Buy to Let properties. You should also be mindful that
a Limited Company is required to file the accounts and financial status of the entire property
portfolio with Companies House on an annual basis.
Advantages of using a Limited Company
Higher tax relief - From 2017 to 2020 the amount of Buy to Let tax relief individual landlords can
claim back will be progressively cut from a maximum of 45% to 20% for top rate taxpayers.
However, this change does not affect Limited Companies. Therefore, if you are a top rate
tax payer, the tax payable via a Limited Company will be lower than tax on individual income.
No tax on dividends ≤£5,000 for individuals – from April 2016, the Dividend Tax Credit will be
replaced by a new tax-free Dividend Allowance of £5,000. This means you client can potentially
receive tax free dividend income from your investment properties.
No income tax when reinvesting profits to secure further properties – Your client could grow a
BTL portfolio more quickly within a Limited Company as there will be no income tax on the
retained profit, thus allowing more cash to re-invest. Although corporation tax is payable on
trading profits (20%; 2015/16; reducing to 18% by 2020), this is lower than the higher income tax
rate (40% for £31,786 to £150,000; 2015/16).
Personal funds can be drawn back out of the company - any advances you make to your
Limited Company (e.g. the mortgage deposit), you can draw back out of the company by way of
Disadvantages of using a Limited Company
No Capital Gains Tax (CGT) allowance when the company sells a property – whereas individuals
selling a property would have £11,100 CGT allowance (2015/16)
Additional cost of running a Limited Company - such costs include the preparation of
accounts, company tax and corporation tax calculations for HMRC, filing at Companies
House, legal fees, and annual auditing if applicable. A client’s accountant may also charge
higher fees when preparing accounts for Limited Companies.
Higher mortgage rates – Most lenders charge higher interest rates and fees for Limited
Companies compared to Individual Buy to Let mortgages.
Reduced choice of lenders and mortgages – Many lenders do not offer mortgages to
Limited Companies, and often if they do, the product range is much smaller.
PLEASE NOTE, Mr Mortgages do not give tax advice, it is best to speak to a professional tax adviser/accountant when considering options of how to purchase buy to let properties.