The main reason investors set up a limited company is tax. When you buy property personally, you can’t claim all your mortgage interest as a tax deduction anymore. But if you buy through a company, you can still deduct the full mortgage interest from your rental income before paying tax. That means you only pay corporation tax on your actual profits, which can save you money, especially if you’re borrowing to buy.
Another benefit is flexibility. A company lets you keep your rental income inside the business, so you can reinvest in more properties without immediately paying yourself a salary or dividends. That’s handy if you want to grow your portfolio quickly.
That said, there are some things to watch out for. Mortgages for companies usually have higher interest rates and fees than personal buy-to-let loans. Plus, lenders almost always want a personal guarantee, so you’re still personally responsible if the company can’t pay the mortgage.
There’s also more paperwork involved. Companies have to file accounts every year, submit corporation tax returns, and keep detailed records. Unless you’re comfortable with this, you’ll need to hire an accountant, so factor that cost in.
If you already own a property personally and want to move it into a company, be careful. You’ll likely have to pay Stamp Duty and Capital Gains Tax, which can be expensive. Before doing anything, talk to a solicitor and accountant to understand the costs and tax implications.
When you talk to your solicitor, make sure to check that the property will be registered under the company name properly, and ask about any personal liability you might have. Also, check that your mortgage and lending terms suit the company structure.
Buying your first rental through a limited company can be a smart move, but it’s not the only way to start. We recommend looking at your own situation and long-term goals carefully, get in touch for a little advice in making a choice that works for you.
