Should I buy personally or through a limited company?
It’s the first question almost every landlord asks me, and the honest answer is: it depends. Since mortgage interest relief was restricted for individual landlords (Section 24), companies have become the default choice for many higher-rate taxpayers: a company pays corporation tax on profit after deducting all its mortgage interest, while an individual gets only a basic-rate tax credit.
But a company isn’t automatically better. Rates can be slightly higher, there are accountancy costs, and taking money out of the company is a tax event in itself. If you’re a basic-rate taxpayer planning to hold one or two properties, personal ownership may still win. If you’re building a portfolio and reinvesting profits, a company usually pulls ahead.
A must-read disclaimer: I’m a mortgage adviser, not a tax adviser, and this decision is as much about tax as it is about lending. I’ll show you how each route affects your borrowing power and your rates, but please take advice from a qualified accountant or tax adviser before you choose a structure.
SPV vs trading company
Most buy to let lenders want to lend to a Special Purpose Vehicle (SPV): a company that exists purely to buy and hold property, and does nothing else. A clean SPV is quick to underwrite: no trading accounts to pick through, no business risk sitting alongside the property.
Buying through your existing trading company (the one that runs your plumbing firm or consultancy) is possible, but the lender pool shrinks and underwriting gets slower, because the lender takes on your trading risk too. In many cases it’s cleaner to set up an SPV alongside the trading company and move funds between them properly.
SIC codes explained
When you register an SPV at Companies House, lenders expect to see the right SIC codes, the classifications that describe what the company does. For property investment, the ones lenders look for are:
- 68100: Buying and selling of own real estate
- 68209: Letting and operating of own or leased real estate
- 68201: Renting and operating of Housing Association real estate
- 68320: Management of real estate on a fee or contract basis
Most SPVs use 68100 and/or 68209. Get the codes wrong and some lenders will decline before a human ever looks at the case, a two-minute fix that I check on day one.
Director’s loans
Your deposit usually gets into the company as a director’s loan: you lend your own money to your company, and the company owes it back to you. Done properly, this is one of the most useful features of the company route: the company can repay the loan to you from future rental profits without the tax charge that dividends attract. Lenders will want to see where the deposit came from and confirm the loan sits behind their mortgage, which is entirely standard.
Intercompany loans
Got retained profits sitting in your trading company? An intercompany loan lets the trading company lend the deposit to your property SPV, so there’s no need to draw the money out personally and pay income tax on it first. Some lenders are relaxed about this, others want particular structures (like a common shareholding between the companies), and a few won’t accept it at all. Knowing which is which is exactly the sort of thing I’m for.
Personal guarantees
Limited liability doesn’t quite mean what people hope in buy to let: almost every lender requires the directors (and often shareholders over ~20-25%) to sign a personal guarantee. If the company can’t pay, you’re personally on the hook. You’ll normally be required to take independent legal advice before signing: a solicitor confirms you understand what you’re agreeing to. It sounds alarming, but it’s a standard part of virtually every company buy to let mortgage.
Corporation tax & extracting profits
Companies currently pay corporation tax at 19% on small profits, rising to a 25% main rate for profits over the thresholds, often less than a higher-rate taxpayer would pay personally, which is a big part of the appeal. But remember the second tax point: getting money out. Salary, dividends, pension contributions and director’s loan repayments all have different tax treatments, and the best mix depends on your circumstances. If you’re reinvesting profits into the next property rather than drawing them, the company route really shines: profits roll up inside the company at corporation tax rates and fund the next deposit.
Again: structure and extraction are tax questions. I’ll make sure the mortgage works around your plan; your accountant should confirm the plan itself.
Built for future portfolio growth
This is where I’d encourage you to think beyond the first purchase. A company structure set up properly now, with the right SIC codes, a clean SPV and sensible shareholdings (including, for some families, share classes that help with succession planning), makes property two, three and ten dramatically easier. Lenders can see a track record building inside one clean entity, retained profits fund deposits faster, and remortgaging to release equity for the next purchase becomes routine.
Whether you’re buying your first company property or your fifteenth, I’ll make sure the lending is structured for where you’re going, not just where you are.
What I’ll do for you
Check your company setup (or guide you through creating the SPV), research the whole market including specialist company lenders, run the stress tests, and manage the application through to completion, including the personal guarantee and independent legal advice steps. Initial chat and research: free. Arrangement fee: £495 on completion.