Are you a landlord in the UK wanting to maximise your profits? Perhaps you are interested in building a portfolio of properties and want to ensure you don’t pay more tax than you need to.
If so, you have likely come across limited company buy to lets and wondered if it makes financial sense for you to take this investment path.
About limited company buy to lets
A limited company buy to let is the process of taking out a buy to let mortgage via a company, rather than in your personal name. This process has become more popular for landlords in the UK over the years due to changes in tax laws.
Limited company buy to let mortgages are more specialist than residential mortgages, or even buy to let mortgages taken out in personal name. As a result, seeking the advice of a specialist broker such as Commercial Trust’s mortgage experts can be really helpful in getting the expertise you need to find a suitable loan.
A mortgage broker is perfectly placed to get you a limited company buy to let mortgage, but they cannot advise you as to whether that is the right investment route for you to take – you will need professional tax advice for that.
Below are some considerations to help you understand when a limited company buy to let makes the most financial sense for landlords:
When you’re a higher rate taxpayer
One of the most common reasons that landlords choose a limited company buy to let is due to the tax savings.
Higher rate taxpayers in the UK pay 40% income tax (increasing to 42% in April 2027) and additional rates taxpayers pay 45% (increasing to 47% in April 2027), which is a significant portion of their earnings. However, with a limited company buy to let, you only have to pay 19-25% corporation tax on any profits.
As such, it can make sense for higher earners to buy a property via a business entity, as it might save a lot of money over time.
When you have multiple buy to let properties
If you have multiple buy to let properties, or you are at least in the process of building a large property portfolio, it may make sense to do it all under a company name.
This is because you can use the profits earned from your limited company buy to lets to reinvest and build up your portfolio more easily. This way, you may not pay as much tax as if you had taken the income as profit for yourself.
When you can cover the admin costs
Before choosing a limited company buy to let investment route, it is important to know that you can cover the admin costs.
The administrative costs involve things like initial set up costs, professional tax advice, stamp duty land tax, as well as more ongoing admin costs (e.g. an accountant). If you can cover these (and the benefits of owning property under a company name outweigh the costs), then doing so makes sense.
In summary
As a landlord, you are always making financial decisions that affect your financial position, not just now, but also long into the future.
Thorough research and professional tax advice may demonstrate that going down the limited company buy to let investment route, is definitely a good idea because you can achieve tax savings and any initial costs will recouped as time passes.
Doing so may help you build wealth and keep the process professional, in a business-like structure, that you’ll might find is easier to pass down to your loved ones.
