Simply Mortgages can help you grow your property portfolio in a tax efficient way

Limited company buy to let mortgages are available from various different lenders including high street banks and building societies and specialist mortgage broker only lenders. As a experienced buy to let mortgage brokerage Simply Mortgages can access preferential terms on mortgages that would otherwise be unavailable on the high street.

We understand the buy to let market through our many years of experience and fully understand the tax complexities and the best way to use a Limited Company to finance various different types of property including Student Accommodation, Homes of multiple occupation (HMO) and properties that require significant refurbishment.

In the same way that a standard buy to let mortgage works, the principals are similar. The key difference being, rather than you the client owning the property, the limited company owns it. Since tax changes which were started to be phased in back in 2016/17. It has become significantly less attractive to own a property in personal name.

As of April 2020, you can no longer offset mortgage interest against your tax liability, meaning that you are now effectively getting taxed on the turnover of the rental income minus basic property maintenance costs.

Therefore, more and more landlords are either moving their portfolio into a Limited Company or buying new properties via a Limited Company. 

This makes more sense as you pay corporation tax at 19% but only on the profit that the company makes which takes into account the interest costs.

This type of Limited Company is called a special purpose vehicle (SPV)

Following tax changes that took effect from 2016/17, this has become more popular but how does the selling of a property in personal names to a Ltd Company name work?

The first thing to be aware of is that the lender will allow you to gift the equity that you have within the property to the company way of a director’s loan and therefore the Ltd company does not have fund a deposit to buy the property from you. You will be liable for stamp duty on what is called the consideration which is effectively the amount of mortgage borrowed. It is also worth noting that you will be liable for capital gains tax on the sale. Always seek professional tax advice before undertaking this transaction.

It is significantly harder to obtain a limited company buy to let mortgage if the company that is purchasing the property is already trading and performs other activities.

Although a Limited Company buy to let is taken out in the company name which legally has limited liability as it is a separate entity, most mortgage lenders will require that the directors & shareholders of the company provide a personal guarantee. You are guaranteeing to the lender that if the limited company does not make the mortgage repayments then you will personally liable.

To discuss your requirements in more detail, use the link below.