Limited company buy-to-let: a landlord’s guide

Since the tax changes to mortgage interest relief, more landlords hold buy-to-let property through a limited company than ever before. But “limited company” is a broad label. It covers everything from a simple special purpose vehicle to trading companies, LLPs, multiple shareholders, and group structures, and each has different implications for tax, for the mortgages you can get, and for how you run the portfolio. This guide explains the structures and what they mean for borrowing, so you can have an informed conversation with your accountant and your broker. The choice of structure is a decision for professional advisers, not one to make from a guide, but knowing how the options work makes that conversation far more productive.

Why landlords use a limited company

The main driver is tax. For individual landlords, relief on mortgage interest is now restricted to the basic rate, which increased the tax bill for higher-rate taxpayers in particular. A limited company is taxed differently: it pays Corporation Tax on its profits, and it can deduct mortgage interest in full as a business expense, which for some landlords changes the maths significantly.

Companies also suit landlords who are building a portfolio and reinvesting, because profits retained in the company are taxed at Corporation Tax rates rather than personal rates, leaving more to reinvest. And a company structure can help with succession and passing wealth to family over time.

None of this makes a company the right choice for everyone. Extracting profit from a company is taxed again personally, there are setup and running costs, and mortgage rates are usually a little higher than personal buy-to-let. Whether the tax benefit outweighs the cost depends entirely on your income, your plans, and your portfolio, which is exactly why this is an accountant’s decision, not a rule of thumb.

The SPV: the standard structure

Most limited company buy-to-let runs through a special purpose vehicle, or SPV. This is a company set up for the single purpose of holding property, with nothing else going on inside it.

Lenders strongly prefer SPVs, because a clean, single-purpose company is simple to assess. When you set one up, it needs the right property-related SIC codes, the codes that describe what a company does, so that its purpose is clearly property. The most common is 68209, for letting and operating your own real estate. Using the correct codes from the outset avoids problems later.

Because SPVs are so well understood, they are the easiest company structure to get a mortgage for, and most specialist lenders, along with a growing number of mainstream lenders, lend to them readily.

Trading companies and mixed-activity companies

A trading company is one that does something else as well as, or instead of, holding property, an existing business that also owns rental property, for example. These are harder to finance. Fewer lenders will consider lending to a trading company, and those that do apply more scrutiny, because the company’s other activities affect its risk.

If property sits inside a trading company, moving it into a clean SPV is often discussed with an accountant, but that is a taxable event in its own right, so it needs careful advice before anything is done.

Shareholders and directors

Who owns and runs the company matters to lenders as much as the company itself.

Landlords often add family members as shareholders, a spouse, a partner, or adult children, to split income for tax purposes or to plan for succession. That is common and legitimate, but it has lending consequences. Many lenders require all significant shareholders, typically those above a set percentage, to be party to the mortgage and to give personal guarantees. Some lenders cap the number of shareholders or directors they will accept, and shareholders who are minors, or who live abroad, can narrow the options further.

The practical point is that the shareholder and director arrangement should be decided with both your accountant, for the tax and succession angle, and an awareness of how lenders will view it, because a structure that is tax-efficient on paper can be difficult to finance if it does not fit lender criteria.

Personal guarantees

Lending to a limited company almost always involves personal guarantees from the directors, and often from significant shareholders. A personal guarantee means that, although the company is the borrower, the individuals stand behind the debt personally. This is standard for company buy-to-let, and it is worth understanding before you incorporate, because it means the limited liability of the company does not fully insulate you from the mortgage.

LLPs and partnerships

A limited liability partnership, or LLP, is a different structure again. It combines limited liability with partnership-style taxation, meaning the members are generally taxed as individuals on their share of the profit, rather than the entity paying Corporation Tax.

LLPs are less common for buy-to-let than SPVs, and fewer lenders will lend to them, so they are more specialist territory. They sometimes appear in more elaborate arrangements, including hybrid structures that combine a partnership with a company. These schemes have attracted scrutiny from HMRC, so they are firmly in the territory where specialist tax and legal advice is essential before going anywhere near them. A general partnership, without the limited liability, is simpler but is taxed much like personal ownership.

Group and holding company structures

Larger portfolios sometimes use a group structure: a holding company that owns several SPVs beneath it. This can help with ringfencing risk across properties, with refinancing flexibility, and with succession planning for a substantial portfolio.

For lending, group structures are more complex. Lenders have to consider the relationships between the companies, inter-company arrangements, and often cross-guarantees, so the pool of lenders willing to engage is smaller and the underwriting is more involved. A group structure can be the right answer for a large, sophisticated portfolio, but it is a structure to build deliberately with advisers, not one to drift into.

Trusts and other structures

Some landlords hold property through trusts, usually for succession and inheritance planning. Trusts are legally and tax complex, need proper legal advice, and are financed by a smaller set of lenders. They are worth knowing exist, but they are firmly a professional-advice structure rather than something to arrange alone.

What your structure means for your mortgage

There is a clear thread running through all of the above. The simpler and cleaner the structure, the easier it is to finance, and the more lenders you can choose from. A clean SPV opens the widest choice. A trading company, an LLP, multiple or overseas shareholders, a group structure, or a trust each narrows the field, because each adds something a lender has to assess and not every lender will.

Two further points apply to any company case. Personal guarantees from directors, and often significant shareholders, are the norm. And the company needs appropriate property SIC codes for lenders to accept it. Beyond that, company buy-to-let is criteria-driven in the same way as any other case, so the structure has to fit the lender as well as the tax plan.

Because company and complex-structure lending is specialist, and much of it is only available through intermediaries, most landlords arrange these mortgages through a broker who can match the structure to lenders who will accept it.

The trade-offs

A company structure is a balance, not a free win.

• Tax. Full interest deductibility and Corporation Tax rates can help higher-rate and portfolio landlords, but extracting profit is taxed personally, so the benefit depends on whether you draw the income or reinvest it.
• Cost and admin. Companies cost money to set up and run, with accounts, filings, and Corporation Tax to manage.
• Mortgage rates. Company buy-to-let rates are usually a little higher than personal, and complex structures can carry a further premium.
• Moving existing property in. Transferring property you already own personally into a company is a sale to the company, which can trigger stamp duty and capital gains tax, so it is rarely as simple as it sounds and needs careful advice.
• Complexity. The more elaborate the structure, the higher the cost, the narrower the lending options, and the greater the need for ongoing professional advice.

Getting it right

The structure decision should be made with the right advisers before you buy, because changing it later is expensive.

• An accountant for the tax and structure decision, and for whether incorporating existing property makes sense.
• A solicitor for complex structures, LLPs, group setups, and trusts, where the legal implications are significant.
• A broker for the lending, to match your chosen structure to lenders who will finance it.

Getting the structure right at the outset, with the mortgage implications considered alongside the tax, is far cheaper than unwinding the wrong one later.

Frequently asked questions

What is an SPV?
A special purpose vehicle is a limited company set up solely to hold property, with no other trading activity. It is the standard structure for limited company buy-to-let and the easiest to get a mortgage for.

Why do landlords use a limited company for buy-to-let?
Mainly for tax. Companies can deduct mortgage interest in full and pay Corporation Tax rather than personal income tax, which can benefit higher-rate and portfolio landlords. Whether it is worthwhile depends on your circumstances, so it is a decision for an accountant.

What SIC code does a property company need?
Lenders want a company with property-related SIC codes, most commonly 68209 for letting and operating your own real estate. Using the correct codes from the start avoids issues when you apply for a mortgage.

Do all shareholders need to be on the mortgage?
Often, yes. Many lenders require significant shareholders, above a set percentage, to be party to the mortgage and to give personal guarantees, and some cap the number of shareholders or directors, so the shareholder arrangement affects who will lend.

Can I hold buy-to-let property through an LLP?
You can, but fewer lenders will finance an LLP than a standard SPV, so it is more specialist. LLPs and hybrid partnership structures also carry tax complexity and HMRC scrutiny, so they need specialist advice.

Should I move my existing properties into a limited company?
Possibly, but it is a taxable event. Transferring personally owned property into a company can trigger stamp duty and capital gains tax, so it is rarely straightforward and always needs an accountant’s advice first.

Is limited company buy-to-let cheaper?
Not on the mortgage rate, which is usually a little higher than personal buy-to-let. The potential saving is on tax, for the right landlord, which is why the answer depends entirely on your income and plans.

The takeaway

Limited company buy-to-let is not one thing. It ranges from a simple SPV, which most landlords use and which is straightforward to finance, through to LLPs, group structures, and trusts, which are specialist and need real advice. The structure you choose shapes your tax, your mortgage options, and how you run the portfolio, and the more complex it is, the narrower your lending choices become. Decide it with an accountant, a solicitor where the structure warrants one, and a broker for the lending, and get it right before you buy.