Buy to let Limited Company

Using a Limited Company for Buy to Let Properties

If you are considering investing in Buy to Let properties through a Limited Company, it is important to know the advantages, disadvantages and responsibilities associated with company ownership before making a decision.

Should I set up a Limited Company for my Buy to Let properties ?

There is no straightforward answer to this question. For each case, the response could differ depending on personal circumstances, future intentions, and the availability of mortgage finance to Limited Companies for the purchase of Buy to Let properties.

You should also be mindful that a Limited Company is required to file the accounts and financial status of the entire property portfolio with Companies House on an annual basis.


Advantages of using a Limited Company:

  • Higher tax relief – From 2017 to 2020 the amount of Buy to Let tax relief individual landlords can claim back will be progressively cut from a maximum of 45% to 20% for top rate taxpayers. However, this change does not affect Limited Companies. Therefore, if your client is a top rate tax payer, the tax payable via a Limited Company will be lower than tax on individual income.
  • No tax on dividends £5,000 for individuals – from April 2016, the Dividend Tax Credit will be replaced by a new tax-free Dividend Allowance of £5,000. This means your client can potentially receive tax free dividend income from their investment properties.
  • No income tax when reinvesting profits to secure further properties – Your client could grow a BTL portfolio more quickly within a Limited Company as there will be no income tax on the retained profit, thus allowing more cash to re-invest. Although corporation tax is payable on trading profits (20%; 2015/16; reducing to 18% by 2020), this is lower than the higher income tax rate (40% for £31,786 to £150,000; 2015/16).
  • Personal funds can be drawn back out of the company – any advances your client makes to their Limited Company (e.g. the mortgage deposit), they can draw back out of the company by way of Directors Loan. Disadvantages of using a Limited Company

Dis-advantages of using a Limited Company:

  • No Capital Gains Tax (CGT) allowance when the company sells a property – whereas individuals selling a property would have £11,100 CGT allowance (2015/16)
  • Additional cost of running a Limited Company – such costs include the preparation of accounts, company tax and corporation tax calculations for HMRC, filing at Companies House, legal fees, and annual auditing if applicable. A client’s accountant may also charge higher fees when preparing accounts for Limited Companies.
  • Higher mortgage rates – Most lenders charge higher interest rates and fees for Limited Companies compared to Individual Buy to Let mortgages.
  • Reduced choice of lenders and mortgages – Many lenders do not offer mortgages to Limited Companies, and often if they do, the product range is much smaller. However, at Fleet Mortgages we offer almost as many Limited Company products as Individual products, ranging from 65% LTV up to 80% LTV. Should your client Transfer from Individual name to Limited Company? It should be recognised that transferring existing properties from an individual name into a Limited Company structure may be more complex than purchasing new properties within. Your client would be liable to pay Capital Gains Tax and Stamp Duty Land Tax (SDLT) on the transfer, which tends to make this less desirable. On the other hand, this decision may depend on your client’s future intentions since many landlords who want to expand their portfolio do so via a Limited Company structure, and may be willing to carry these one off costs to do so. Why Fleet Mortgages? Fleet Mortgages has a fantastic range of products specifically designed for those buying through a Limited Company. With our breadth of experience, we not only provide attractive rates but also flexible criteria, offering a Limited Company as a complete solution to clients.

Chelmsford, Essex:

> 01245 333 222


Hadleigh, Essex:

> 01702 684 222


Liverpool Street, London:

>020 3475 1212