Limited Company Buy to Let Mortgages Made Simple: A Landlord’s Guide
Limited company buy to let mortgages are changing the way landlords invest in property. Paragon Bank's research shows that two-thirds of landlords plan to use specialist purchase vehicles when buying their properties. This shift in approach makes perfect sense.
Most people think getting a ltd company buy to let mortgage is complicated, but it can be a great choice for property investors. The process often confuses landlords who aren’t sure if these products fit their needs. The range of limited company buy to let mortgage lenders might seem overwhelming at first.
This piece will clear up everything about limited company buy to let mortgages. You’ll learn why more investors choose them, what makes them different from personal mortgages, and how to find the best rates that match your investment goals.
What is a limited company buy to let mortgage?
A limited company buy to let mortgage is a specialised loan that helps landlords who buy investment properties through a company structure instead of their personal name. The limited company owns the property while the landlord serves as the company’s director and shareholder.
How it is different from personal buy to let
The main difference comes down to ownership and liability. Personal buy to let mortgages put the property in your name, making you personally responsible. The limited company mortgage puts the property under your company’s ownership, which acts as a separate legal entity.
There’s another reason that makes these mortgages stand out – tax treatment. Limited companies pay corporation tax on profits (19% for profits up to £50,000, gradually increasing to 25% for profits over £250,000). Individual landlords face income tax rates that can reach 45% on rental income. On top of that, companies can deduct all mortgage interest payments as a business expense, while individual landlords get only a 20% tax credit on mortgage interest.
Why landlords head over to the limited company route
The number of landlords creating limited companies has doubled since 2017. The UK now has over 400,000 buy to let companies. Tax changes in 2017 that affected personal landlords sparked this growth.
Higher-rate taxpayers see substantial tax benefits. Companies can still deduct all mortgage interest from rental income before calculating tax – a benefit personal landlords lost after Section 24 tax changes. On top of that, companies can reinvest profits into future property purchases without personal tax implications. This makes growing a property portfolio much easier.
Portfolio landlords love this approach. About 73% of landlords who own more than 11 properties plan to buy through a limited company.
SPV limited company explained
An SPV (Special Purpose Vehicle) is a limited company that exists only to buy, sell and let properties. Unlike regular trading companies that participate in various business activities, SPVs focus solely on property ownership.
Lenders prefer SPVs because they understand their structure and risks. They know the money stays focused on property-related activities. The UK has over 325,000 buy to let SPVs registered with Companies House. More than 170,000 registered in the last five years. These numbers show how landlords realise the benefits of incorporating their property business.
Key benefits and drawbacks for landlords
Your tax position, costs, and overall profitability depend on whether you choose personal or limited company ownership for buy-to-let properties. Let’s get into what matters to help you decide if a limited company structure fits your investment strategy.
Tax efficiency and corporation tax
Tax efficiency makes limited company ownership attractive. Limited companies pay corporation tax on profits at rates of 19% for profits up to £50,000 and 25% for profits over £250,000 (2025/26 tax year). Individual landlords pay up to 45% in income tax. Higher-rate taxpayers can save a lot of money this way.
Here’s a real example: A limited company with £12,000 annual rental income and £6,563 mortgage interest would pay £1,033 in tax and keep £4,405 profit. A higher-rate taxpayer with the same property would pay £3,863 in tax and keep just £3,450 profit.
Mortgage interest relief advantages
The way mortgage interest is treated might be the best reason to consider a limited company. After Section 24 tax changes, individual landlords can only claim a basic 20% tax credit for mortgage interest. Limited companies can still deduct 100% of mortgage interest as a business expense before calculating taxable profit.
This makes a big difference for higher-rate taxpayers. Take a landlord with £24,000 rental income and £7,000 mortgage interest – a limited company would pay £3,230 tax, while a higher-rate taxpayer would face an £8,200 bill.
Higher mortgage rates and fees
Notwithstanding that, these tax benefits come at a cost. Limited company buy-to-let mortgages usually cost more – about 0.5% to 1% above personal mortgages. On top of that, arrangement fees and other charges cost more for company mortgages.
Running a limited company means extra admin costs like accountancy fees, annual filing requirements, and corporation tax returns.
Limited lender options
You’ll find fewer lenders offering limited company buy-to-let products compared to personal options. Less competition means fewer products to choose from.
But the market is growing. Landlords set up 41,700 companies in 2020 alone – 23% more than the previous year. More lenders have joined the market, which has helped narrow the gap between personal and company mortgage rates.
How to get a limited company buy to let mortgage
Securing a limited company buy to let mortgage requires several distinct steps. Here’s a practical guide to help you get this specialist finance.
Setting up an SPV company
The first step requires registering an SPV (Special Purpose Vehicle) with Companies House. Your company needs appropriate Standard Industrial Classification (SIC) codes—typically 68100, 68201, 68209, or 68320. The SPV should be registered in England, Wales, or Scotland and maintain private limited legal status. Note that most lenders accept only SPVs created specifically to buy, let, and sell properties.
Documents and eligibility requirements
Lenders typically need:
- Certificate of Incorporation
- Memorandum and Articles of Association
- Personal identification for all directors
- Proof of address and personal tax returns
All directors must provide personal guarantees to most lenders. On top of that, directors/shareholders must typically hold a combined 75% of shareholding rights. Most lenders evaluate applications based on directors’ income when dealing with newly formed SPVs.
Working with a limited company mortgage broker
A specialist broker can guide you through the complexities of limited company mortgages. They identify suitable lenders and make the application process smoother. These experts help prepare documentation, submit applications, and act as intermediaries between you and potential lenders.
Using a limited company buy to let mortgage calculator
Online calculators make it easy to estimate your borrowing potential and compare various mortgage options. These tools show monthly payments, initial rates, reversion rates, and product fees. Advanced calculators even let you philtre by rate type, loan-to-value ratios, and monthly costs.
Comparing lenders and finding the best deal
Getting the best limited company buy to let mortgage just needs thorough research and comparison. Landlords now have more choices than ever with 1,730 fixed rate deals available in the market (up from 841 in October 2023).
How to compare limited company buy to let mortgage rates
The interest rate isn’t everything when comparing mortgages. You should think over arrangement fees, early repayment charges, and overall terms. Your choice between interest-only or repayment options will impact your monthly costs. Interest-only deals cost less each month but you’ll need separate savings to pay off the principal. The length of your mortgage term also affects costs. Longer terms mean lower monthly payments but you’ll pay more interest overall.
Top limited company buy to let mortgage lenders in the UK
Several well-known institutions offer competitive limited company buy to let products. Leeds Building Society asks companies to have specific SIC codes (68100/7012, 68209/7020, or 68320/7032). Barclays wants the majority shareholder to have a minimum personal income of £25,000 yearly. You can find more options through specialist brokers like Commercial Trust who work with over 80 lenders.
Tips for securing the cheapest limited company buy to let mortgage
To get better rates:
- Keep loan-to-value ratios low
- Use an SPV instead of a trading company
- Work with an experienced broker who knows the limited company mortgage market
- Have all documentation ready upfront
- Look into portfolio mortgages if you own multiple properties
Fixed vs variable rates for ltd company mortgages
Fixed-rate mortgages keep your interest rate steady for a set time (usually two, five, or ten years). This gives you payment certainty whatever the market does. Variable-rate options cost less at first but leave you open to rate increases. Average two-year fixed rates for limited companies have dropped by a lot from 6.53% in October 2023 to 5.04% now.
Using online tools for limited company buy to let mortgage comparison
Online calculators make comparison simple. These tools show you monthly repayments, initial rates, reversion rates, and fees clearly. You can philtre by rate type, loan-to-value ratios, and other criteria to find what suits you. Some brokers have their own tools that search the whole market to find the right financing options.
Conclusion
Buy-to-let mortgages through limited companies are a great option for many landlords. This is especially true for higher-rate taxpayers looking to be tax-efficient. Deducting mortgage interest as a business expense is one of the biggest benefits compared to personal ownership. On top of that, lower corporation tax rates versus personal income tax can optimise profitability for landlords with high rental income.
But this setup has its trade-offs. You need to factor in higher interest rates, fees, and administrative costs when making your decision. That’s why it’s crucial to run the numbers based on your specific situation before you commit.
The market for limited company mortgages has grown tremendously. There are now more products than ever before. This growth has helped reduce the difference between personal and company mortgage rates. So landlords now have access to better deals than in the past.
If you’re thinking about this path, team up with specialist brokers who know limited company lending inside out. These experts can direct you through each lender’s requirements and find products that match your investment strategy.
And here’s something important – running property investments through an SPV needs careful planning beyond mortgages. Your financial goals should guide how you handle tax on profit extraction, long-term succession, and overall investment strategy. When you get it right, a limited company buy-to-let can be a powerful way to build and manage a profitable property portfolio with excellent tax benefits.
Key Takeaways
Limited company buy to let mortgages have become increasingly popular, with two-thirds of landlords now planning to use this structure for property investments. Here are the essential insights every landlord should know:
- Tax efficiency drives adoption: Limited companies pay corporation tax at 19-25% versus personal income tax up to 45%, with full mortgage interest deductibility still available.
- Higher costs offset tax benefits: Company mortgages typically cost 0.5-1% more in interest rates plus additional administrative expenses and fees.
- SPV structure preferred by lenders: Special Purpose Vehicles created solely for property investment offer better lending terms than general trading companies.
- Market expansion improves options: Available products increased from 841 to 1,730 deals, narrowing the rate gap between personal and company mortgages.
- Professional guidance essential: Specialist brokers help navigate complex requirements, documentation, and identify suitable lenders from the limited pool offering company products.
The decision ultimately depends on your tax position, investment scale, and long-term strategy. Higher-rate taxpayers with substantial rental income typically benefit most from the limited company structure, despite the additional costs and complexity involved.
