What is a Limited Company BTL?
Instead of buying property in your personal name, you set up a limited company (often called an SPV - Special Purpose Vehicle) to purchase and own the property. The company takes out the mortgage and receives the rental income.
Why the Change?
Before April 2017, landlords could deduct mortgage interest from rental income before calculating tax. The government gradually removed this relief for individual landlords, but companies can still claim full mortgage interest relief.
Example: £1,000 monthly rent, £600 mortgage interest. As an individual higher-rate taxpayer, you pay 40% tax on the full £1,000 rent (£400), then get a 20% tax credit on the interest (£120). Net tax: £280. In a company, you pay corporation tax on £400 profit (£100). Potential saving: £180/month.
When Does Company Ownership Make Sense?
Company ownership isn't right for everyone. It depends on your tax situation, plans, and portfolio size.
Consider a company structure if:
- You're a higher-rate (40%) or additional-rate (45%) taxpayer
- You plan to build a portfolio of multiple properties
- You don't need the rental income to live on
- You're comfortable with company admin and accountancy
- You're starting fresh (no existing properties to transfer)
Personal ownership may be better if:
- You're a basic-rate taxpayer
- You have just one or two properties
- You need the rental income for living expenses
- You want simplicity over tax optimisation
- You already own properties personally (transferring triggers CGT and stamp duty)
Setting Up an SPV
Setting up a company is straightforward and costs around £12-50 through Companies House. However, you need the right SIC codes for property activities.
Common SPV SIC codes:
- 68100 - Buying and selling of own real estate
- 68201 - Renting and operating of own or leased real estate
- 68209 - Other letting of own property
Mortgage Considerations
Limited company mortgages typically have slightly higher rates than personal BTL mortgages, though the gap has narrowed. Not all lenders offer them, but the market has grown significantly.
Most SPV lenders require personal guarantees from directors. This means you're personally liable if the company defaults on the mortgage - it's not a way to limit your liability.
Ongoing Costs and Admin
Running a company involves additional costs and responsibilities.
Company running costs:
- Accountancy fees (£500-£2,000+ per year)
- Company tax return (CT600) filing
- Annual confirmation statement to Companies House
- Keeping proper company records
- Potential dividend tax when extracting profits
Don't transfer existing properties into a company without professional advice. You'll trigger Capital Gains Tax on the transfer and pay stamp duty as if buying the property again.