Should I hold my Buy to Let via a Limited Company?
Connect can assist with a range of specialist lenders that are happy to lend to UK limited companies, whether those companies are new SPVs (SPV – Single Purpose Vehicle Companies) or whether the company is an existing trading company. Connect also have access to lenders that will lend to offshore companies.
Purchasing a new BTL
Since the Government restricted the tax relief for higher rate tax payments, purchasing a BTL via a limited company has become increasingly popular.
Higher rate taxpayers are restricted to only basic rate relief against their monthly mortgage payments when they hold the property in their personal name. However, if the property is held inside a limited company, it will still benefit from the mortgage payment being offset against the rental income before the due tax is calculated, and higher rate tax relief can then be achieved. However, corporation tax applies rather than income tax.
There is also a rental calculation benefit of buying a property via a company. As it is expected that tax bills for higher rate taxpayers will have lower tax bills if they buy a property via a company, lenders are able to be more generous with the amount they will lend.
If you hold a portfolio of property in your personal name and think it would be best held inside a company, you should seek advice. This is because the transfer from your own name to a limited company is deeded as a sale and purchase, and stamp duty and capital gains tax may apply.
There are now a wide range of lenders who will consider clients who wish yo hold their property via a limited company, with a wide variety of company types considered. Contact a specialist adviser at Connect who will be happy to talk you through how limited company mortgages work and how they compare with individual ownership.
For purchases or existing properties, landlords should look to seek specialist property tax advice first to see which is the best route for them. This will be based on a number of factors, such as their tax band, who is involved in the portfolio, plans for the portfolio longer term and whether they require to take income or capital from the portfolio for personal use.