Limited Company Mortgage Guide | Everything You Need to Know About Buying Property Through a Limited Company
Are you considering buying an investment property through a limited company structure? Limited company buy-to-let mortgages have become an increasingly popular choice for landlords and property investors, particularly those seeking to expand their portfolios in a more tax-efficient manner.
By purchasing a property through a limited company, often referred to as a Special Purpose Vehicle (SPV), investors can benefit from different tax treatment on rental income and mortgage interest, as well as more flexible ownership structures. However, this route also comes with additional responsibilities, costs, and criteria that lenders expect borrowers to meet.
This guide will walk you through everything you need to know about limited company mortgages, including how they work, potential benefits, risks, eligibility requirements, tax considerations, and how they compare with traditional personal buy-to-let mortgages. Whether you are a first-time landlord exploring your options or an experienced investor seeking to optimise your property strategy, understanding the ins and outs of limited company mortgages is essential before making your next move.
What is a Limited Company Mortgage?
A limited company mortgage is a type of buy-to-let mortgage specifically designed for properties purchased through a limited company, rather than in your personal name.
Typically, lenders require the company to be a Special Purpose Vehicle (SPV) – a company set up solely to hold property. This is usually registered under SIC code 68100 (Buying and selling of own real estate) or similar.
2. Why Use a Limited Company?
Using a limited company to invest in property has become more popular, especially since tax changes affecting individual landlords.
Common reasons include:
Better tax efficiency (particularly for higher-rate taxpayers)
Full mortgage interest relief as an allowable business expense
Easier portfolio management
Potential for inheritance planning
3. Pros & Cons of Limited Company Mortgages
| Pros | Cons |
|---|---|
| Mortgage interest is fully tax-deductible | Mortgage rates tend to be slightly higher |
| Corporation tax (currently 19% or 25%) can be lower than personal income tax | Fewer lenders offer limited company BTL mortgages |
| Easier to add/remove shareholders (e.g. family members) | Complex setup (requires company formation and legal advice) |
| Profits can be retained within the company | Additional admin and accountancy costs |
| Potentially more effective inheritance tax planning | Tax on dividends when withdrawing profits personally |
4. Tax Considerations
Tax is one of the biggest motivators for using a limited company. Here’s how it differs:
| Tax Area | Personal Name (BTL) | Limited Company |
|---|---|---|
| Mortgage interest | Restricted (basic rate only) | Fully deductible as business expense |
| Income Tax | Up to 45% | Corporation Tax: 19%-25% |
| Profit withdrawal | Direct income | Via salary/dividends (may be taxed again) |
| Inheritance planning | Less flexible | Easier to transfer shares |
| Stamp Duty | Applies in both cases | Still applies (plus 3% surcharge) |
Note: Always speak with a qualified tax adviser to understand what’s best for your specific circumstances.
5. Eligibility Criteria for Limited Company Mortgages
Each lender has slightly different requirements, but common criteria include:
| Criterion | Requirement |
|---|---|
| Company Type | Must be a UK-registered SPV (Special Purpose Vehicle) |
| SIC Code | Typically 68100 (or 68209, 68320) |
| Directors | UK-resident, over 21, usually homeowners |
| Credit History | Clean personal and business credit profile preferred |
| Experience | Some lenders prefer experienced landlords, others accept first-time landlords |
| Deposit | Typically 25%-30% minimum deposit |
| Rental Income | Must meet lender’s stress tests, usually 125%-145% of mortgage interest at a notional rate |
| Accountant | You’ll need a good accountant to help with company structure and tax planning |
6. Limited Company vs Personal Buy-to-Let: At a Glance
| Feature | Personal BTL | Limited Company BTL |
|---|---|---|
| Mortgage rates | Generally lower | Slightly higher |
| Mortgage interest tax relief | Restricted | Fully deductible |
| Tax on profits | Personal Income Tax (up to 45%) | Corporation Tax (19-25%) |
| Admin requirements | Minimal | Requires accounts, company returns |
| Property ownership | In your name | In company name |
| Profit extraction | Direct | Via salary/dividends (taxed again) |
7. Myth Busters: Separating Fact from Fiction
| Myth | Truth |
|---|---|
| “It’s only for big landlords.” | Not true. Even first-time landlords can use a limited company. |
| “It’s too complicated.” | Yes, it’s more admin – but the long-term tax benefits can outweigh this. |
| “Lenders won’t accept me.” | There are dozens of lenders offering limited company BTL mortgages today. |
| “I can use my trading company.” | Usually not recommended. Lenders prefer SPVs to reduce risk. |
| “It’s only worth it if you own 10+ properties.” | Not always. Even one or two properties may benefit from this structure. |
8. Steps to Apply for a Limited Company Mortgage
Set Up an SPV Limited Company
Register with Companies House and use an appropriate SIC code.Open a Business Bank Account
This is essential for managing income and expenses.Consult a Mortgage Broker
Use a specialist broker who understands limited company BTL.Gather Documentation
Proof of ID & address
Business bank statements
Company incorporation details
Personal income details (sometimes needed)
Find a Suitable Property
Make sure the rent meets affordability criteria.Submit Mortgage Application
Your broker will guide you through the process.Legal & Valuation Process
Just like a standard BTL mortgage.Mortgage Offer & Completion
Once all checks are done, your mortgage offer is issued and you can complete.
9. Frequently Asked Questions
Can I transfer personally owned properties into my limited company?
Yes, but be aware of Capital Gains Tax, Stamp Duty, and legal fees. Seek professional tax advice first.
Do I need to be an experienced landlord?
Not necessarily. Some lenders accept first-time landlords.
Is a limited company mortgage more expensive?
Rates are slightly higher, but tax savings can make it more cost-effective overall.
Can I buy property with a trading company?
Not usually advisable. Most lenders prefer a clean SPV to separate property risks from trading risks.
Limited company mortgages can be a smart move for landlords looking to maximise profits and long-term growth. While they come with added complexity, the tax benefits and control over your portfolio can be worth it—especially if you work with a knowledgeable broker and tax adviser.
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