| Usual structure | SPV with property SIC codes such as 68100 or 68209 |
|---|---|
| Corporation tax | 19% small profits rate to 25% main rate |
| Mortgage interest | Deductible as a company expense |
| Stamp duty | 5% surcharge applies on every residential purchase |
| Personal guarantees | Usually required from directors |
| Regulation | Limited company buy-to-let is not FCA-regulated |
Why do landlords buy through a limited company?
The main reason is tax on mortgage interest. Individual landlords cannot deduct mortgage interest from rental income. They receive only a basic rate tax credit instead. Companies can deduct interest as a business cost.
Companies pay corporation tax on profits, at 19% for small profits rising to 25% for profits above £250,000. Individual landlords pay income tax, and property income tax rates are due to rise by 2 percentage points from April 2027. For higher-rate taxpayers growing a portfolio, a company can be more tax-efficient. It is not right for everyone.
What is an SPV limited company?
A special purpose vehicle (SPV) is a company set up only to hold property. Lenders prefer SPVs because the finances are clear. Most use SIC codes such as 68100 (buying and selling own real estate), 68209 (letting and operating of own or leased real estate) or 68320 (management of real estate).
Trading companies with other business activity have fewer lender options. See limited company buy-to-let mortgages.
How do limited company mortgages work?
They work much like standard buy-to-let mortgages. Lenders mainly assess the rental income against an interest coverage ratio (ICR). For limited companies the ICR is often 125%, compared with up to 145% for higher-rate individual landlords. This can allow a larger loan on the same rent.
Deposits are usually 25%, sometimes lower. Directors and major shareholders normally give personal guarantees, so you remain personally liable. Choice of lenders is good, though rates and fees are often a little higher. Read our ICR guide.
What taxes apply when a company buys property?
Companies pay the 5% stamp duty surcharge on every residential purchase, even their first. In England and Northern Ireland, a flat 17% rate can apply to homes over £500,000 bought by companies, unless a relief such as the property rental business relief applies. Non-resident companies pay a further 2%.
Residential property worth over £500,000 held by a company may also fall within the Annual Tax on Enveloped Dwellings (ATED). Let properties can often claim relief, but a return may still be needed. See our stamp duty guide.
What are the downsides of a limited company?
A company is not automatically cheaper. Points to weigh include:
- Extracting profits as salary or dividends is taxed again personally.
- Accountancy and filing costs are higher.
- Mortgage rates and fees can be higher than for individuals.
- Personal guarantees mean you remain liable for the debt.
- Fewer lenders for very small or unusual cases.
If you need the rental income to live on, the tax benefit may be smaller than expected.
Can I move my existing properties into a company?
You can, but it is treated as a sale at market value. That may trigger capital gains tax for you and stamp duty for the company, including the surcharge. Your existing mortgage must be repaid and a new company mortgage arranged, possibly with early repayment charges.
Some reliefs exist, such as incorporation relief, but they have strict conditions. Always take specialist tax advice before transferring property. OMB arranges the mortgage side but does not give tax advice.
Who is a limited company structure best suited to?
It usually suits higher or additional rate taxpayers, landlords planning to grow a portfolio, and investors who will reinvest profits rather than draw them. It may suit those planning longer-term family ownership.
It may suit basic rate taxpayers with one or two properties less well. Limited company buy-to-let is not regulated by the FCA, so fewer protections apply.
How does profit extraction work in a property company?
Profits belong to the company, not to you personally. To use them, you usually take dividends, a salary or repayments of any money you lent the company.
Dividends are taxed at dividend rates after corporation tax has been paid. Many landlords lend their deposit to the company as a director's loan. Repaying that loan is generally not taxed. Planning this with an accountant from the start can make a large difference to your long-term returns.
Sources
- GOV.UK: SDLT for corporate bodies
- GOV.UK: Buying an additional residential property
- GOV.UK: Annual Tax on Enveloped Dwellings: the basics
- MoneyHelper: Buy-to-let mortgages explained
Frequently asked questions
Is it better to buy a buy-to-let personally or through a limited company?
It depends on your tax rate, portfolio plans and need for income. Companies can deduct mortgage interest and pay corporation tax, which often suits higher-rate taxpayers. Individuals avoid a second tax charge when drawing profits. Speak to a tax adviser before deciding.
Can a new limited company get a mortgage?
Yes. Many lenders lend to newly formed SPVs with no trading history. They assess the directors' personal finances and credit, and the property's rental income. Directors usually need to give personal guarantees.
Do I pay the stamp duty surcharge if it is my company's first property?
Yes. Companies pay the 5% higher rates on any residential purchase of £40,000 or more, even their first. Non-resident companies also pay the 2% surcharge. A 17% flat rate may apply above £500,000 unless a relief is available.
What SIC code do I need for a buy-to-let company?
Most lenders prefer SIC codes 68100, 68209 or 68320, which cover buying, selling, letting and managing property. A company with these codes and no other trading activity is usually called an SPV. Check with your accountant when forming the company.
Are limited company mortgage rates higher?
They are often a little higher than personal buy-to-let rates, and fees can be higher too. The gap has narrowed as more lenders entered the market. A lower ICR can still mean a company borrows more on the same rent.
Can I live in a property owned by my limited company?
Generally not with a buy-to-let mortgage. Lenders forbid occupation by directors or family. It may also create tax charges such as a benefit in kind, and ATED could apply on higher-value homes. Take tax advice before considering it.
Can I transfer my property to my limited company without paying tax?
Usually not. A transfer is treated as a sale at market value, so capital gains tax and stamp duty may apply. Limited reliefs exist for genuine property businesses, with strict conditions. Specialist tax advice is essential.
Can I get a limited company mortgage with a 25% deposit?
Yes. A 25% deposit is the most common requirement for limited company buy-to-let. Some lenders accept 20% or less, but choice narrows and the rent must still meet the lender's interest coverage test. A larger deposit may give access to better terms.
Important: This guide is general information, not personal advice. Rules, rates and lender criteria change; speak to an adviser about your circumstances. Your home may be repossessed if you do not keep up repayments on your mortgage.