Buy-to-Let Through a Limited Company

For higher-rate (40%) and additional-rate (45%) taxpayer landlords, the shift from full mortgage interest deductibility to a basic-rate tax credit significantly increased the effective tax cost of personally held buy-to-let mortgages. A limited company structure allows mortgage interest to be deducted fully as a business expense before corporation tax - restoring the pre-2020 economic position for the company. The net tax saving for a higher-rate taxpayer can be substantial, particularly as the portfolio grows.

A Special Purpose Vehicle (SPV) is a limited company incorporated specifically to hold property investment assets. The company's standard industrial classification (SIC code) is typically set to 68209 (Other Letting and Operating of Own or Leased Real Estate) or 68100 (Buying and Selling of Own Real Estate). Most Ltd Co BTL mortgage lenders require the company to be a new SPV rather than an existing trading company, as this separates the property assets from any trading business risk.

The mortgage is in the company's name, not the individual director's name. The company is the borrower. Most lenders require personal guarantees from all directors or shareholders with a meaningful shareholding (typically 20%+ or 25%+). The company's rental income from the property services the mortgage; the company's profits are subject to corporation tax; dividends can then be drawn by the director-shareholders. The property is the company's asset, not the individual's.

Not all buy-to-let lenders offer limited company products. High-street banks - particularly HSBC, NatWest, and Santander - either do not offer Ltd Co BTL or have very restricted appetite. The specialist BTL lender panel - Precise, Paragon, Foundation Home Loans, Fleet Mortgages, Landbay, BM Solutions (limited), and specialist building societies - is the primary market for Ltd Co BTL mortgages.

Limited company BTL mortgages typically carry a slightly higher rate than equivalent personal-name BTL products - typically 0.1-0.4% - reflecting the perceived additional risk of company borrowing. LTV up to 75-80% is available from specialist lenders. The ICR stress test is generally 125% for companies paying corporation tax (as a proxy for the basic rate tax environment).

Ltd Co BTL is not automatically the right structure for every landlord. For basic-rate taxpayers, the tax saving is limited and the higher mortgage rate may outweigh it. For landlords purchasing a single property and not expecting to grow the portfolio, the compliance costs of running a limited company (annual accounts, corporation tax returns, Companies House filings) may exceed the tax benefit. Take accountancy advice specific to your situation before deciding.