Getting a limited company buy to let mortgage

Are you looking to grow your property portfolio? In that case, a limited company buy to let mortgage could be an option you’re exploring.

In this guide, we’ll explain what a limited company buy to let mortgage is all about. So, let’s dive right in and explore how it could help you and what you’ll need to watch out for. This way, you can decide if it’s the right kind of mortgage for your business.

What is a buy-to-let mortgage for limited companies?

A buy-to-let mortgage for limited companies lets you borrow money for properties through your company instead of your own name.

These mortgages are for buying or remortgaging residential properties that are currently rented out, or will be ready to rent within a month.

Am I eligible for one?

Getting a buy-to-let mortgage through a limited company is a lot like getting a standard mortgage, but there are a few extra things you’ll need:

• A deposit of 20% to 25% (some lenders may ask for 30% or more)
• A rental income that’s at least 125% of the monthly mortgage payments
• Proof of income and savings
• A good credit history for both personal and company accounts
• Directors should be under retirement age or provide proof of other income sources
• If you own multiple properties, you might need a lender that deals with portfolio landlords
• Your company must also be set up specifically for property transactions

So, what are the benefits of a limited company buy-to-let mortgage?

Curious about the benefits? If you think this type of mortgage is a solid move for your business, here are some of the key benefits of making the switch.

1. A new limited company is easy to set up

If you’re a landlord considering setting up a limited company, you’ll be happy to know that the process is pretty simple. You can get it done online in about 15 minutes. But it is wise to talk to an accountant or legal advisor first to make sure everything’s in order.

2. Future planning can be easier

Transferring ownership through a limited company is often a lot more straightforward than transferring individual property ownership.

This can help you avoid Stamp Duty, Inheritance Tax, and Capital Gains Tax (CGT), which is especially useful if you’re planning to pass your business on to a family member. 

3. Grow your portfolio faster

If growing your property portfolio is a priority, then a limited company buy-to-let mortgage could be ideal.

When you sell a property, the profit remains within your company. This means you’ll avoid personal Capital Gains Tax, saving you on taxes. The result? More money to reinvest, allowing your property portfolio to grow more quickly and efficiently.

4. More personal protection with limited liability

If you manage a buy-to-let property through a limited company, you won’t be personally responsible for the company’s debts. This includes any debts that might arise from your property portfolio. so you can relax knowing that your personal assets are safe.

But are there any disadvantages?

While there are plenty of benefits, there are a few disadvantages you’ll need to consider. 

1. No Capital Gains Tax allowance

Limited companies don’t get a Capital Gains Tax (CGT) allowance. Instead, they’ll need to pay Corporation Tax on their profits.

But it’s worth noting that the CGT allowance for private landlords has decreased significantly over recent years, and this will be just £3,000 in the 2024/25 tax year.

2. Higher mortgage rates

You’ll also need to consider the difference in mortgage rates. Lenders often charge higher interest rates and fees for mortgages through limited companies compared to personal buy-to-let mortgages.

3. Limited choice of lenders

Not all lenders offer buy-to-let mortgages for limited companies, and those that do might have fewer options available. This can limit your choices and might affect the terms you can get.

4. Different tax obligations

Managing a property through a limited company can make your finances a little more complicated. You’ll need to submit a corporate tax return each year on behalf of your property company.

Can TaxScouts help?

Need a hand? We can help you take care of things. We’ll put you in touch with an accredited accountant who can take care of your corporate tax return for you. Get started here.