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buy to let mortgage for limited company

The Complete Guide to Buy to Let Mortgages for Limited Companies in the UK

In recent years, the buy to let market in the UK has experienced significant changes. From tax implications to regulatory reforms, it is essential for property investors to stay informed and adapt their strategies accordingly. One significant shift in the market has been the increasing popularity of buy to let mortgages for limited companies. In this comprehensive guide, we will explore what buy to let mortgages for limited companies are, the advantages and disadvantages of this approach, and how Mortgage Knight can help you navigate this complex landscape with ease.

What are Buy to Let Mortgages for Limited Companies?

Buy to let mortgages for limited companies are designed for property investors who hold their rental properties within a limited company structure. Traditionally, individual landlords would secure buy to let mortgages in their own name. However, recent tax changes have made it less favorable for some landlords to hold properties in their personal names. Limited company buy to let mortgages have gained popularity as an alternative option for many landlords.

There are two main types of limited company structures that landlords use for buy to let purposes: a trading company or a Special Purpose Vehicle (SPV). A trading company, as the name suggests, is a company that is engaged in diverse business activities in addition to owning and managing rental properties. An SPV, on the other hand, is a specialized company created for the sole purpose of holding and managing rental properties. Most mortgage lenders have more favorable lending criteria for SPVs, as they represent a lower risk investment compared to a trading company.

Advantages of Buy to Let Mortgages for Limited Companies

There are several advantages to using a limited company structure for buy to let properties. One significant advantage is the tax benefits associated with this approach. Following changes to the tax regime, landlords who hold properties in their personal names are no longer able to deduct mortgage interest from their rental income before calculating their tax liability. This means that higher and additional rate taxpayers will no longer receive tax relief on mortgage interest payments and will be subject to income tax on their full rental income.

In contrast, limited companies are not subject to the same tax restrictions. Rental income is taxed as corporation tax rather than under the income tax rules, allowing landlords to continue to deduct mortgage interest payments as a business expense. Furthermore, corporation tax rates are lower compared to income tax rates for higher and additional rate taxpayers, making this approach more tax-efficient for many investors.

Another advantage of utilizing a limited company structure for buy to let properties is the potential for asset protection. By holding properties within a limited company, landlords may be able to safeguard their personal assets in the event of financial difficulties or liability claims. This can provide peace of mind and a layer of protection for landlords against unforeseen circumstances.

Disadvantages of Buy to Let Mortgages for Limited Companies

Although there are many advantages to using a limited company structure for buy to let properties, there are also certain disadvantages to consider. One potential downside is the increased administrative burden associated with running a limited company. This includes maintaining company accounts, filing annual returns with Companies House, and fulfilling other legal and regulatory obligations. Additionally, limited companies are subject to greater scrutiny and more stringent lending criteria from mortgage lenders, which can make securing financing more challenging for some landlords.

Another disadvantage of using a limited company for buy to let properties is the potential for higher upfront costs. Setting up and running a limited company incurs various costs, including legal fees, accountant fees, and annual filing fees. Furthermore, mortgage products for limited companies often come with higher interest rates and arrangement fees compared to standard buy to let mortgages. This can impact the overall profitability of the investment and requires careful consideration before proceeding with this approach.

Mortgage Knight: Your Partner in Buy to Let Mortgages for Limited Companies

Navigating the complexities of the buy to let market, especially when using a limited company structure, can be daunting. At Mortgage Knight, we specialize in providing tailored mortgage solutions for property investors, including buy to let mortgages for limited companies. Our team of expert advisors is dedicated to understanding your unique circumstances and providing personalized guidance every step of the way.

We understand the challenges and opportunities that come with utilizing a limited company structure for buy to let properties. Our extensive network of lenders allows us to access a wide range of mortgage products that are specifically designed for limited companies. We work tirelessly to find the most competitive rates and favorable terms for our clients, ensuring that they can maximize their investment potential.

One of the key advantages of working with Mortgage Knight is our commitment to ensuring that contacting us does not affect your credit rating. We understand the importance of protecting your credit profile while exploring your mortgage options and we go above and beyond to safeguard this for our clients. Our transparent and customer-centric approach sets us apart from other mortgage brokers, and we pride ourselves on building long-lasting relationships based on trust and reliability.

In conclusion, buy to let mortgages for limited companies offer a compelling alternative for property investors in the UK. The tax benefits, potential asset protection, and flexibility associated with this approach make it an attractive option for many landlords. However, it is essential to carefully weigh the advantages and disadvantages before proceeding with this strategy. With Mortgage Knight by your side, you can confidently navigate the buy to let market and capitalize on the opportunities that this approach presents. Contact us today to learn how we can help you with all your mortgage needs and guide you towards a successful investment journey.

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