Why Smart Landlords Choose Limited Company Buy to Let Mortgages

Furthermore, when you opt for buy to let mortgages through a ltd company structure, you can claim full mortgage interest as a business expense—something that’s no longer possible with personal ownership. Limited company buy to let mortgages also provide the added benefit of protecting your personal assets. Additionally, any profits retained within your company can be reinvested into future property purchases without triggering personal tax liabilities.

In this guide, we’ll explore why an increasing number of savvy landlords are choosing the limited company route for their property investments. You’ll discover exactly how these mortgages work, the potential tax benefits, and whether this approach might be the right strategy for your property portfolio.

A limited company buy to let mortgage enables you to purchase investment properties through a corporate entity rather than in your personal name. Unlike personal ownership, the property is bought and owned by your limited company, with the mortgage held in the company’s name rather than yours as an individual.

The fundamental purpose of both limited company and personal buy-to-let mortgages remains the same – financing property intended for rental income. However, the structures differ significantly in several ways.

The most notable difference lies in ownership and liability. With a personal buy-to-let mortgage, you as an individual own the property under your name and bear personal responsibility for the mortgage. In contrast, with a limited company structure, your company (a separate legal entity) owns the property.

Regarding taxation, limited companies pay corporation tax on profits (19-25% depending on profit levels) rather than personal income tax rates that can reach 40-45%. Moreover, companies can deduct full mortgage interest as a business expense before taxation, an advantage no longer available to individual landlords.

Another significant distinction concerns costs. There’s generally a narrower market of lenders for limited company mortgages, and consequently, the interest rates they charge tend to be higher than those for individuals. This cost difference stems from many lenders considering limited company buy-to-let loans riskier.

To qualify for a limited company buy-to-let mortgage, your company must be established with the sole purpose of buying, letting and selling properties – commonly known as a Special Purpose Vehicle (SPV).

Most lenders require your company to be registered with specific Standard Industrial Classification (SIC) codes that identify your business purpose. The most commonly accepted SIC codes include:

• 68100 – Buying and selling of own real estate
• 68209 – Other letting and operating of own or leased real estate
• 68320 – Management of real estate on a fee or contract basis

Primarily, lenders will accept applications from private limited companies registered in England, Wales or Scotland. While some accept newly formed SPVs, others may request up to two years of accounts.

In terms of company structure, directors and shareholders named on the mortgage application must typically have a combined minimum of 75% shareholding and voting rights. Many lenders require personal guarantees from all directors, meaning you remain personally liable for the debt if the company fails to make repayments.

Essentially, the application process involves providing both company documents (such as Certificate of Incorporation, Memorandum and Articles of Association) and personal documentation from directors (identification, proof of address, and tax returns).

Although some lenders have minimum income requirements, an increasing number don’t specify threshold amounts. Instead, they focus on ensuring your income isn’t disproportionately small compared to your borrowing.

For established companies with multiple properties, lenders may request additional information such as a business case and detailed portfolio spreadsheets outlining your properties and their profitability.

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Record numbers of landlords now opt for limited company buy to let mortgages, with over 400,000 buy-to-let companies operating in the UK. This figure has more than doubled since 2017, demonstrating the growing appeal of this investment structure. Indeed, 73% of landlords with portfolios exceeding 11 properties plan future purchases through limited companies. Let’s explore why this approach has become increasingly popular.

Lower tax rates and full interest deductibility

The tax advantages of limited company structures represent perhaps the most compelling reason for their popularity. Companies pay corporation tax on profits (19% for profits up to £50,000, rising to 25% for profits over £250,000), substantially lower than personal income tax rates of up to 45% for additional rate taxpayers. For higher-rate taxpayers, this tax differential alone can generate significant savings.

Even more importantly, limited companies can still deduct 100% of mortgage interest payments as a business expense before calculating taxable profits. In contrast, individual landlords now receive only a 20% tax credit on mortgage interest, following changes phased in between 2017 and 2020[91].

Given that mortgage interest typically constitutes one of the largest expenses for buy-to-let investors, this distinction can dramatically impact profitability. For example, with £30,000 in rental income and £10,000 in mortgage interest, a limited company would pay tax on only £20,000 profit, whereas an individual landlord would be taxed on the full £30,000 (with merely a 20% credit on the interest).

Retaining profits for reinvestment

First and foremost, limited company structures offer tremendous flexibility regarding profit utilisation. Profits retained within the company aren’t subject to personal income tax until withdrawn[93], allowing for strategic financial planning.

This arrangement proves particularly valuable for landlords seeking to expand their portfolios. You can reinvest company profits directly into additional properties without triggering personal tax liabilities, potentially accelerating portfolio growth.

Inheritance and estate planning benefits

Limited company structures offer substantial advantages for estate planning. Specifically:

• Shares in your property company can be more easily transferred to family members than directly owned properties
• Family members can be gradually introduced as shareholders, enabling smooth succession planning
• In some circumstances, shares may qualify for Business Relief, potentially reducing inheritance tax liability[102]
• Transferring shares typically involves fewer costs than transferring individually owned properties

For landlords with substantial property portfolios, this approach represents an effective strategy for preserving wealth across generations.

Limited liability protection

Lastly, limited company structures provide a valuable layer of separation between your personal finances and property business. The company name appears on Land Registry documents rather than your personal details, offering greater privacy.

Should your property business face financial difficulties or legal claims, your personal assets remain protected (though this protection may be limited if you’ve provided personal guarantees for company loans). Furthermore, tenant-related debts won’t directly impact your personal credit file.

The combination of these advantages—tax efficiency, reinvestment flexibility, estate planning benefits, and liability protection—explains why an increasing number of landlords choose limited company buy to let mortgages despite potentially higher interest rates and administrative requirements.

Special Purpose Vehicles (SPVs) have rapidly gained popularity among UK property investors, with over 325,000 buy-to-let SPVs now registered with Companies House. Remarkably, over 170,000 of these were established within the past five years alone.

What is a Special Purpose Vehicle (SPV)?

An SPV is a distinct limited company created for the specific purpose of buying, managing and letting property. As a separate legal entity with its own assets and liabilities, an SPV operates independently from its owners. This dedicated structure allows landlords to isolate property investments from other business activities or personal finances.

SPVs function primarily as property holding companies rather than active trading businesses. When you purchase property through an SPV, the company—not you personally—owns the asset. Most lenders who offer mortgages to corporate vehicles prefer SPVs because they’re easier to understand and quicker to underwrite.

For registration purposes, SPVs typically use specific Standard Industrial Classification (SIC) codes that identify their property-focused purpose, including:

• 68100 – Buying and selling of own real estate
• 68209 – Other letting and operating of own or leased real estate
• 68320 – Management of real estate on a fee or contract basis

Benefits of using an SPV for buy-to-let

Beyond the tax advantages covered earlier, SPVs offer several distinctive benefits:

First and foremost, SPVs provide robust liability protection. As a separate legal entity, an SPV shields your personal assets from business-related risks. Unless you’ve provided personal guarantees to lenders, your personal wealth remains protected if the property business encounters financial difficulties.

Secondly, SPVs simplify portfolio management. You can keep multiple properties under a single SPV structure, reducing administration and ongoing costs. This consolidated approach makes accounting, financing, and ownership transfers considerably more straightforward.

Thirdly, SPVs enhance business credibility. Many service providers and tenants take companies more seriously than individual landlords, potentially opening doors to better deals and improved financial opportunities.

Finally, for those planning long-term, SPVs facilitate ownership transfers through share transactions rather than property transfers, which can be more tax-efficient and administratively simpler.

SPV vs general limited company

While all SPVs are limited companies, not all limited companies are SPVs. The key distinction lies in purpose and scope.

An SPV has a singular focus—property investment—whereas a general limited company might engage in multiple business activities. This narrow purpose offers several advantages:

For mortgage applications, lenders typically prefer SPVs over general trading companies. Their focused purpose makes SPVs easier to assess during underwriting, often resulting in more favourable lending terms.

SPVs also offer enhanced asset protection. By isolating property assets within a dedicated vehicle, you protect them from liabilities associated with other business ventures. Conversely, a traditional limited company engaged in various activities might expose its property assets to risks from other business operations.

Additionally, many property developers use separate SPVs for individual projects. This approach keeps each development distinct, making joint venture investments easier to manage.

For optimal results, some landlords adopt a hybrid approach—using personal ownership up to the basic-rate tax band for flexibility, then building additional portfolio holdings through SPVs to maximise tax efficiency.

Related reading:

• Buy To Let Stress Test
• Buy To Let Mortgage Broker UK
• How much can I borrow for a buy to let
• Buy To Let Mortgage Eligibility
• Requirements For Buy To Let Mortgages

While limited company structures offer notable advantages, they come with significant drawbacks that require careful consideration. In reality, these costs can sometimes outweigh the benefits depending on your individual circumstances.

Higher interest rates and deposit requirements

First of all, limited company buy to let mortgages typically charge higher interest rates than those available to individual landlords. This results from fewer lenders serving the limited company market, reducing competition and driving up costs.

The deposit requirements are equally demanding. The standard deposit for a limited company buy to let mortgage is typically 25%, though some lenders accept 15-20%. This higher requirement reflects lenders’ perception of increased risk, as empty properties still require mortgage payments regardless of rental income. The larger your deposit, undoubtedly the better your mortgage rate will be.

Administrative and legal responsibilities

Running a limited company brings additional obligations absent from personal property ownership. As a director, you must maintain accurate company records, file annual accounts with Companies House, and submit corporation tax returns to HMRC. Most landlords hire accountants to manage these responsibilities, resulting in ongoing professional fees.

In addition to the paperwork, limited companies face stricter lending criteria. Many lenders require personal guarantees from directors, effectively linking your personal finances to company debt. This undermines some liability protection benefits mentioned in previous sections.

Double taxation and dividend tax

One of the most significant challenges is the ‘double taxation’ issue. After paying corporation tax (19-25% depending on profit levels), any profits withdrawn as dividends face additional taxation.

The dividend allowance for 2025/26 stands at only £500. Thereafter, dividend tax applies at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, or 39.35% for additional rate taxpayers. As a result, the combined tax burden can sometimes exceed what you’d pay as an individual landlord.

No capital gains allowance

Unlike individual property owners, limited companies cannot use the annual capital gains tax allowance when selling properties. Individuals benefit from a £3,000 annual exemption, whereas companies must pay corporation tax on the entire gain.

Furthermore, extracting these sale proceeds creates another tax event. The company pays corporation tax on the gain, then shareholders potentially pay income or capital gains tax when withdrawing the remaining funds. This scenario creates a potentially higher tax liability than selling property as an individual, who would pay capital gains tax at 18% (basic rate) or 24% (higher rate) after deducting their allowance.

Transferring existing properties from personal to limited company ownership requires careful planning and consideration of tax implications. The process involves several important steps and potential costs that need to be weighed against long-term benefits.

How the transfer process works

Initially, you must sell your property to your limited company at current market value. This necessitates a professional RICS valuation. The transaction involves preparing transfer deeds, board minutes, and loan agreements. Effectively, you’re selling to a company you own, but legally it’s treated as a separate entity.

Capital Gains Tax and Stamp Duty implications

Upon transfer, Capital Gains Tax applies to any profit between your original purchase price and current value. Accordingly, Stamp Duty Land Tax is calculated on the property’s full market value, not the transfer amount. For a £300,000 property, your company would pay approximately £14,000 in Stamp Duty. Nonetheless, some landlords qualify for Incorporation Relief, which defers CGT until property or company shares are sold.

Mortgage refinancing considerations

Prior to transfer, mortgage considerations are vital. Most lenders won’t transfer existing personal mortgages to a company. Therefore, you’ll likely need to redeem your current mortgage and arrange new limited company financing. Commercial mortgages typically have higher interest rates and stricter criteria.

When switching makes financial sense

The transfer makes financial sense primarily for landlords with larger portfolios who won’t need to withdraw profits immediately. By comparison, for portfolios under 10 properties, transfer costs often outweigh tax benefits.

Limited company buy to let mortgages have become increasingly popular among UK landlords for good reason. The tax benefits alone make this option worth considering, especially for higher-rate taxpayers who can benefit from lower corporation tax rates and full mortgage interest deductibility. Additionally, the ability to retain profits within your company for reinvestment without triggering personal tax liabilities provides significant growth opportunities for your property portfolio.

Despite these advantages, this approach comes with notable challenges. Higher interest rates, stricter deposit requirements, and additional administrative responsibilities must be carefully weighed against potential tax savings. The double taxation issue when withdrawing profits as dividends could actually result in higher overall tax burdens for some landlords.

Whether this structure works for you depends largely on your specific circumstances. For landlords with substantial portfolios who plan to reinvest profits rather than withdraw them, limited company structures generally offer compelling benefits. Conversely, those with smaller portfolios or who need regular income from their properties might find the higher costs and administrative burdens outweigh the potential tax advantages.

The decision ultimately requires careful consideration of your long-term investment strategy. Taking time to assess your personal tax situation, investment timeline, and future portfolio goals will help determine if limited company buy to let mortgages align with your property investment objectives. Should you decide to proceed, consulting with financial and legal professionals will ensure you structure your company properly and maximise the benefits while minimising potential drawbacks.

Smart landlords are increasingly choosing limited company buy-to-let mortgages for compelling tax advantages and portfolio growth opportunities, despite higher costs and administrative requirements.

• Limited companies pay corporation tax at 19-25% versus personal income tax rates up to 45%, plus retain full mortgage interest deductibility

• Profits kept within the company avoid personal tax until withdrawn, enabling reinvestment into additional properties without triggering tax liabilities

• Higher interest rates and 25% deposit requirements mean costs can outweigh benefits for smaller portfolios under 10 properties

• Transferring existing properties triggers Capital Gains Tax and Stamp Duty, making this structure best suited for new purchases

• SPV structures provide liability protection and simplified estate planning through share transfers rather than property transfers

This approach works best for higher-rate taxpayers with substantial portfolios who plan to reinvest profits rather than withdraw them immediately. The decision requires careful analysis of your tax situation, investment timeline, and long-term portfolio goals to determine if the benefits justify the additional costs and complexity.