Limited Company Buy-to-Let
Since mortgage interest relief was withdrawn for individual landlords, buying rental property through a limited company has become the default structure for many investors, particularly higher-rate taxpayers – not because it hides anything from lenders, but because of how the resulting tax bill is genuinely calculated.
What This Page Covers, and How It Differs From Our Company Director Mortgages Page
It’s worth being clear about the distinction from the outset. Our Company Director Mortgages page covers how a director’s salary and dividends, or share of retained profit, are assessed for their own personal residential mortgage. This page covers something genuinely different: using a limited company specifically as the vehicle that owns and lets a rental property, rather than holding that investment property in your own personal name.
What an SPV Actually Is
Most limited company buy-to-let mortgages require the borrowing company to be a Special Purpose Vehicle – a limited company set up with the sole purpose of holding and letting property, rather than a trading business that happens to also own a rental property. Lenders check this by looking at the company’s registered SIC code, commonly 68100, 68209, or 68320, all of which signal property investment or letting activity specifically.
Why the Tax Position Genuinely Drives This Decision
Since mortgage interest relief for individual landlords was restricted, replaced with a 20% tax credit rather than a full deduction, many landlords – particularly higher and additional rate taxpayers – have found that holding property through a limited company genuinely reduces their overall tax burden. Within a company structure, mortgage interest remains fully deductible against corporation tax before profit is calculated, rather than being restricted the way it is for personally held property.
The Genuine Trade-Off: Two Layers of Tax
It’s worth understanding this isn’t simply a tax-free workaround. The company itself pays corporation tax on its rental profits, and you then pay further tax, typically as dividends or salary, when you actually extract money from the company for personal use. Whether this two-tier structure genuinely works out better than personal ownership depends on your individual tax position, your income from other sources, and how much profit you plan to draw out versus retain – worth discussing properly with a qualified accountant before restructuring how you hold property.
How Much More Common This Structure Has Become
Around 63% of buy-to-let lenders now offer limited company products, a proportion that’s continued growing since the tax changes took effect, and pricing has narrowed considerably – many limited company rates now sit within just 0.2-0.4 percentage points of equivalent personal-name products, a meaningfully smaller gap than in the years immediately following the tax changes.
Loan-to-Value and ICR
Most lenders offer up to 75% loan-to-value on standard SPV products, with some specialist lenders extending to 80% for strong applications, and larger portfolio facilities sometimes capped more conservatively around 60-65%. Rental cover is commonly tested at 125% for limited company borrowers, genuinely more favourable than the 145% typically required of higher-rate individual taxpayers, reflecting the corporation tax treatment.
Setting Up an SPV
Registering a limited company for this purpose is genuinely straightforward – done online through Companies House for a modest fee, taking only minutes, provided you choose an appropriate SIC code and confirm the company’s sole purpose is property investment or letting, with no unrelated trading activity.
Your Personal Credit Is Still Checked
It’s worth understanding clearly that using a company structure doesn’t remove you from the underwriting process. Lenders look at the property as security and the company as the formal borrower, but they also assess the directors and shareholders behind the company – the corporate wrapper doesn’t hide the individuals responsible for it, and you’ll typically still be asked to provide a personal guarantee.
New SPVs vs Established Companies
Some lenders will consider a brand new SPV, incorporated specifically for the purchase and with no trading history at all; others prefer to see a company that’s been established for at least a year. It’s worth understanding which category your specific company falls into before assuming every lender’s criteria will be identical.
Why “Layered” Company Structures Can Cause Problems
Some more complex ownership structures involve one company owning another company, which in turn owns the property. It’s worth knowing that a genuine number of lenders won’t accept this kind of layered structure at all, insisting on a single, clean SPV owning the property directly – worth confirming this with your broker before setting up anything more complex than a straightforward single-company structure.
Bringing in Other Investors
A limited company structure genuinely makes it more straightforward to bring in other investors as shareholders than holding property in your own personal name would, since ownership stakes can be allocated and adjusted through the company’s share structure rather than requiring a more complex joint ownership arrangement on the property title itself.
Larger Portfolios
If you’re building a genuinely substantial portfolio, some structures use a holding company with individual property-owning subsidiary companies beneath it, though this is a considerably more advanced structure worth discussing with both your accountant and broker together. Our Portfolio Landlord Mortgages page covers the broader considerations that apply once you hold four or more mortgaged properties, whether personally or through a company.
Comparing Against Personal Name Ownership
If you’re still weighing up whether a limited company structure genuinely suits your circumstances, our Buy-to-Let Mortgages page covers the standard personal-name route, worth comparing properly against the company structure covered here before committing to either path.
Why Professional Tax Advice Is Genuinely Essential Here
Given how much this decision depends on your individual income, tax position, and long-term plans for the property, it’s worth treating this as a genuine tax and legal decision made alongside a qualified accountant, not purely a mortgage product choice – the right structure for one landlord’s circumstances can be genuinely wrong for another’s.
Frequently Asked Questions
What is an SPV and why do lenders require one?
A Special Purpose Vehicle is a limited company set up solely to hold and let property, rather than a trading business that happens to also own rental property – lenders require this focused purpose to feel comfortable with the structure.
Why do landlords use a limited company for buy-to-let?
Primarily for tax reasons – mortgage interest remains fully deductible against corporation tax within a company, unlike the restricted relief that applies to individually held property.
Does a limited company structure mean I avoid tax entirely?
No – the company pays corporation tax on its profits, and you pay further tax when extracting money as dividends or salary, so it’s genuinely a two-tier structure, not a way of avoiding tax altogether.
Is my personal credit history still checked if the company is the borrower?
Yes – lenders assess the directors and shareholders behind the company, and you’ll typically still need to provide a personal guarantee.
What’s the difference between this and the Company Director Mortgages page?
That page covers a director’s own personal residential mortgage assessed against their salary and dividends; this page covers using a company structure specifically to hold rental investment property.
Get in touch with details of your circumstances and investment plans, and we’ll help you understand whether a limited company structure genuinely suits your situation.
