One of the most common questions from new and existing landlords is whether to buy a buy-to-let property in their own name or through a limited company.
There is no one-size-fits-all answer. The right route can depend on your income, tax position, future plans and the mortgage options available.
Here are the key questions to consider.
What is the difference?
If you buy personally, the property and mortgage are in your own name.
If you buy through a limited company, the company owns the property and takes out the mortgage. Many landlords use a Special Purpose Vehicle (SPV) company set up specifically for property investment.
Why do some landlords use a limited company?
Tax treatment is one of the main reasons.
The way mortgage interest and rental profits are treated can differ between personal and company ownership. However, that does not mean a limited company is automatically the better or more tax-efficient option.
Your accountant or tax adviser should advise on the tax implications for your circumstances.
Are limited company mortgages more expensive?
They can be.
Rates, fees and lender criteria may differ from mortgages offered to individual landlords.
This means it is important to look at the overall cost and suitability, rather than deciding purely on tax or the headline mortgage rate.
Does buying through a company give me fewer mortgage options?
There are now many lenders offering limited company buy-to-let mortgages, although their criteria can vary.
Some lenders prefer companies set up specifically for property investment, while others may consider different company structures.
A mortgage broker can help explain which lenders may be suitable.
What if I want to build a property portfolio?
If you are planning to buy several properties, limited company ownership may be worth exploring.
Someone looking to reinvest rental profits and grow a portfolio may have very different priorities from someone buying a single property for additional income.
Again, professional tax advice is important before making that decision.
Can I buy personally and move the property into a company later?
Potentially, but it is not necessarily a simple transfer.
There can be mortgage, legal, Stamp Duty and tax implications when moving a property from personal ownership into a limited company.
It is therefore worth thinking about the ownership structure before you complete the purchase.
Should I speak to my accountant or mortgage broker first?
Ideally, speak to both.
Your accountant or tax adviser can advise on the tax and ownership structure.
Your mortgage broker can explain how each option could affect:
- lender choice
- mortgage rates and fees
- borrowing capacity
- rental affordability calculations
- deposit requirements
The two pieces of advice should work together.
So, which option is best?
It depends on your individual circumstances and what you are trying to achieve.
Before buying a buy-to-let, it is worth considering the tax, mortgage and longer-term implications rather than simply choosing the structure that appears cheapest today.
At RH Mortgage & Financial Solutions, we can help you understand the mortgage options available whether you are considering buying personally or through a limited company, and we can work alongside your accountant or tax adviser where appropriate.
This article is for general information only and does not constitute tax, legal or accounting advice. Tax treatment depends on individual circumstances and may change. Professional tax and legal advice should be obtained before making a decision.