Typically you will need a special purpose vehicle (SPV), which is a type of limited company specifically designed for buying and renting out property. Your company will need to be in good financial health in order to qualify. Your personal financial situation may also be considered.

There are several reasons why you’ll want to get LTD company buy to let mortgages over traditional buy-to-let mortgages.

1. Section 24 exemption: With LTD company buy to let mortgages business owners can offset all of their mortgage interest, which in turn reduces the profits they report and, as a result, the amount of tax they have to pay in total.
2. Save on tax: If you have a large rental portfolio and are taxed in a higher bracket, you can save further on your tax by getting a buy to let mortgage for a limited company. This is because rental income is taxed not at the personal rate, but at the corporate tax rate.
3. Freedom to use profits: You do not need to immediately claim rental income as profits with a buy to let mortgage limited company Instead you can decide to reinvest the profits either into a pension or into other properties. This gives you the freedom to set your own income and use the rest towards growing your portfolio.
4. More options for inheritance: If you hope to pass on your rental portfolio on to your family, then having a buy to let mortgage for limited company, and in fact to have properties held under a limited company, actually makes it easier to pass on. This is because those properties are protected from stamp duty, inheritance tax, and even capital gains tax liabilities. This is usually done by adding those you wish to inherit as company shareholders.

While there are many buy to let limited company mortgage benefits, the approach isn’t for everyone. In general, if you are a basic rate taxpayer who owns just one or two rental properties, then you’ll usually save more overall by getting a standard buy to let mortgage.

This is because there are several disadvantages of these types of mortgages, too:

1. More expensive for most taxpayers: Unless you’re in a higher tax bracket you may be better off with a standard buy-to-let and without a limited company. If your profits increase and you start to be more impacted by section 24, however, then you may want to reconsider.
2. Additional costs: It costs money to run a company. At minimum you must maintain accurate financial records to return to Companies House and the HMRC. For most, this means having an accountant, or outsourcing to an accounting company, which can cost hundreds if not thousands of pounds per year.
3. You may be taxed twice: You might be taxed twice if you give yourself an income and then take out dividends.
4. No capital gains tax allowance: Those who own properties without a limited company have a tax free allowance that reduces the amount of capital gains tax they pay if they sell. If you own property through a limited company, there is no tax-free allowance.
5. Buy-to-let mortgages are more expensive: Typically a buy to let mortgage for limited companies are more expensive than traditional buy-to-let mortgages due to higher interest rates.

Many landlords may start with individual buy-to-let mortgages. Then once their rental income starts being a detriment to their current situation, they then look into forming a limited company. Then, if you wanted to grow your portfolio from there, you may want to start looking into limited company buy to let mortgages. Our team can help you fully understand your options so that you can make the best decision for your situation.