Why Use a Limited Company for BTL?
Since April 2017, Section 24 tax changes have phased out mortgage interest relief for individual landlords. Higher and additional rate taxpayers can no longer deduct mortgage interest from rental income before calculating tax, significantly increasing their tax bills. Limited companies, however, can still deduct mortgage interest as a business expense, making them more tax-efficient for many landlords looking to expand their portfolio or remortgage existing properties.
Using a Special Purpose Vehicle (SPV) - a limited company set up specifically to hold property - has become standard practice for many investors. While there are costs involved (company accounts, corporation tax on profits), the tax savings often outweigh these for higher-rate taxpayers.
SPV Companies Explained
An SPV is a limited company whose sole purpose is holding property investments. Lenders prefer SPVs because they have simple structures and clearly defined purposes. The company's articles of association should specify that its activities are limited to property investment and related activities.
Setting up an SPV is straightforward through Companies House, typically costing under £50. However, you should seek advice from an accountant to ensure the structure is appropriate for your circumstances and to understand the ongoing accounting and tax filing requirements.
Lenders for Limited Company BTL
Not all buy to let lenders offer limited company products, but the market has grown significantly. Specialist lenders like Paragon, Kent Reliance, The Mortgage Lender, and others have developed strong limited company BTL propositions. Some high street lenders including NatWest and Barclays also offer limited company products.
Rates for limited company BTL mortgages are typically 0.2-0.5% higher than equivalent personal BTL rates. Arrangement fees may also be higher. Despite this, the tax savings usually make limited company ownership worthwhile for higher-rate taxpayers with multiple properties.
Rates vs Personal BTL
While limited company BTL rates are higher than personal BTL rates, the overall financial picture often favours the company structure for higher-rate taxpayers. Corporation tax on profits (currently 25% for larger companies, 19% for smaller) is lower than higher-rate income tax (40-45%), and full mortgage interest relief remains available.
The decision between personal and limited company ownership depends on your tax position, portfolio size, and long-term plans. Our brokers can help you compare the options and, alongside advice from your accountant, determine the most tax-efficient structure for your circumstances.
Get Expert Limited Company BTL Advice
Whether you're purchasing new investment property through a limited company or looking to remortgage existing company-owned BTL properties, our specialists can help. We work with lenders who understand SPV structures and can secure competitive rates for your portfolio. Complete our form for a free, no-obligation consultation.