Limited company buy to let mortgage
Buying a property through a limited company
Buy to let for limited company
A buy to let limited company mortgage can often be more tax-efficient for landlords. Whilst it will not suit every investor’s needs, there are several perks that enable many portfolio landlords and higher-tax payers to considerably reduce their tax bills including:
Corporation tax: You do not need to pay Income Tax on the profits generated from your rental income, which can be as much as 45% for higher-rate taxpayers. Instead, you pay Corporation Tax, which is capped at 19%. Although this is expected to increase to 25% by 2023, it is still far cheaper for landlords who meet the higher rate tax threshold or have a growing portfolio of properties.
Offsetting expenses: Rental income expenses such as mortgage interest, are deemed as business expenses and can therefore be deducted to help reduce your tax bill. Unlike, private landlords who can only claim a 20% tax credit on their mortgage interest payments.
Inheritance tax: Holding rental property in a limited company instead of your own name, can also help you to avoid a hefty inheritance tax bill, if you want to leave it to your loved ones.
Limited company mortgage criteria
The criteria for a ltd company buy to let mortgage is very similar to a conventional buy to let mortgage. You will need at least a 15% deposit and have a minimum rental income of 125% of your mortgage payment.
Setting up a company for buy to let
If you haven’t already got a limited company, then it is easy to do. But setting up a limited company to purchase rental property is generally only worthwhile if you intend on having several properties. So, you should seek independent advice first.
Things to consider
A limited company buy to let mortgage can be a tax-efficient option for many landlords. But there are also a few downsides including:
Capital Gains Tax (CGT): As you do not pay Capital Gains Tax on rental properties held by a limited company, you do not receive a CGT allowance when you sell a property.
Additional costs: If you don’t already own a limited company, you will need to consider the extra costs this will incur.
Fewer mortgage lenders: Some buy to let mortgage lenders do not offer limited company buy to let mortgages. But a whole of market mortgage broker like Fosters Financial can help you access the best deals.
The Financial Conduct Authority does not regulate most buy to let mortgages.