What is a limited company buy-to-let mortgage?

A limited company Buy-to-Let mortgage is where you obtain a Buy-to-Let mortgage through a limited company, rather than under your own name.

Changes to Stamp Duty and Buy-to-Let mortgage interest tax relief in 2016 made growing your portfolio more expensive. Therefore, many individuals began to register as limited companies. By doing this it’s possible for landlords to avoid losing out on tax relief.

Do you qualify?

NO CREDIT CHECKS!

Author's Avatar
Author: Carl Shave - CEO and co-founder
Last updated: 04 Mar 2024

What is the difference between a limited company buy-to-let mortgage and a buy-to-let mortgage?

A limited company buy-to-let mortgage is almost identical to a regular buy-to-let mortgage. The crucial difference lies in how lenders appraise your suitability for the loan. Many high street mortgage providers are less willing to lend to limited companies, as they perceive them as riskier prospects.

As many limited companies seeking this type of loan are in fact self-employed landlords, lenders see chances of business failure as more significant. This can make sourcing a limited company Buy-to-Let mortgage a potentially trickier process.

Fortunately, as the number of limited companies rises, so does the number of mortgage options and providers available to them.

An introduction to Buy-to-Let Mortgages

Buy-to-Let topics

Whether you're investing in your first Buy-to-Let Mortgage or an experienced landlord, we can help.

Useful Information

Can I get a limited company Buy-to-Let property?

Purchasing a Buy-to-Let property using a limited company is open to anyone, subject to lenders criteria. As it’s a more specialised way of buying a property, available lenders are restricted, meaning it can be difficult trying to find a deal that suits you.

Speak to our advisers

What is the required limited company Buy-to-Let mortgage criteria?

The criteria for a standard Buy-to-Let mortgage and a limited company one are essentially the same. The property and rental yield are assessed in the same way and the maximum loan available will range between 75% and 85%, depending on the actual or anticipated rent.

The limited company must be set up with a specific SIC (Standard Industrial Classification) code. This will stipulate that the company cannot perform any activities other than buying and renting property. Typically, the codes used will be:

  • 68100: Buying and selling own real estate
  • 68209: Other letting and operating of own or leased real estate
  • 68320: Management of real estate on a fee or contract basis
Speak to our advisers

Mortgage advice for limited company Buy-to-Let

Buy-to-Let mortgage advice is a very specialist area which includes limited company mortgage arrangements. The list of lenders operating in the limited company arena is steadily growing, however, these lenders tend to only accept applications through mortgage brokers and intermediaries.

At Just Mortgage Brokers, we have a team of specialist advisers with access to the whole of the market. Discuss your needs with us in detail and you can be confident that a suitable lender and mortgage deal can be found for you.

  • Tax efficiency. Any money you draw out of the business will be taxed at the prevailing rate. However, if you leave money in the business and use it to renovate, refurbish or expand your portfolio, you’ll pay the lower rate of corporation tax.
  • Expanding the business is easier. As you become more tax efficient, you may have more capital to use. This could be invested into another Buy-to-Let property or used for improvements on a current property.
  • You choose what to do with profits. As the company director, you can choose to save profits, pay them out through dividends or re-invest them.

Our article on the benefits of limited company Buy-to-Let explains in more detail why this approach is more advantageous for some.

  • Longer process. A Buy-to-Let Mortgage for a limited company may be slightly more complicated to set up. However, by undertaking a full review and discussion of your current situation, you should not have to worry.
  • Limited choice. Mortgages for limited company Buy-to-Let investment properties are not widespread in the mortgage market, so not all lenders are happy to accept applications on this basis. This means that interest rates may potentially not be as attractive as those available for mortgages in a personal name.
  • Additional running costs. This includes the preparation of accounts, calculating company/corporation tax for HMRC, filing with Companies House, paying legal fees, and conducting annual audits if applicable. Your accountant may also charge higher fees when preparing accounts for a limited company.

What is a special purpose vehicle (SPV) for Buy-to-Let?

The term SPV is a term used in the mortgage industry for a limited company, specifically set up for Buy-to-Let properties. A SPV is created as a tax-efficient way for landlords to hold a number of Buy-to-Let properties. As such, it’s a limited company with restricted trading.

The short answer is yes – anyone can set up a new special purpose vehicle. However, you need to be sure that this is the most suitable strategy for you. Consulting with industry specialists, such as a broker and an accountant, can help you ensure it’s the right decision.

As long as the SPV is created with an acceptable SIC (standard industrial classification) code, the company should be suitable to apply for a mortgage.

During the application, the director(s) will be subject to credit scoring to show that the company is creditworthy. As the company will not have a trading or credit history of its own, the lender will also need proof of the director’s income to establish a level of underlying affordability.

An SPV is a limited company created with the purpose to own and manage properties that are rented out for income. Like any other limited company, you can draw income and dividends from the company structure and your profits retained within the company could ultimately be reinvested into expanding your property portfolio.

However, if your limited company receives income from any business other than your Buy-to-Let property, it’s considered a trading company. It’s important to be aware that most lenders will only lend to SPV limited companies. This is because the inclusion of other business channels arguably introduces an element of risk.

There are, however, some more niche lenders who do offer Buy-to-Let mortgages to trading companies.

An SPV may be an existing trading company which will now only be used for your Buy-to-Let business, or a new company with no prior record of trading. Some lenders prefer the latter as it eliminates any potential, albeit unlikely, risks associated with the company’s prior trading activity.

Setting up an SPV or buying an existing limited company to use as an SPV going forward is surprisingly straightforward. You can register a limited company online; it currently costs only £12* to register with Companies House. This usually takes 24 hours to complete.

Your company will also need a SIC code. As previously mentioned, this specifies what type of business the company conducts. Most lenders will require your SPV to have the correct type of SIC registered., specifically relating to property letting. Companies House lists these under section L, ‘Real estate activities’.

*Price correct at the time of writing – October 2023

Share useful information

Limited Buy-to-Let Mortgage FAQs

The criteria is no different to that for a personal application. Therefore, it is indeed possible that you will be able to get the mortgage you need.

The process might be a little more complex and require more legwork, often needing supporting documentation with your application.

You are likely to need to approach a specialist lender who will take a broader view of your circumstances, as traditional lenders tend to avoid those with a bad credit history. They will apply their own individual criteria and consider your current finances, future projections, and more recent credit history.

The nature of the adverse credit event and how long ago it occurred will be important. A few missed store card payments three years ago will carry far less weight than a mortgage default in the last 12 months, for example. If you can meet all the lender’s other criteria and provide a larger than usual deposit, your application should have a good chance.

 

We don’t recommend a specific lender that provides the best Buy-to-Let mortgage rates for limited companies. This is because each application is assessed on an individual basis, therefore just because a lender is good for you, it doesn’t mean it will be for everyone.

Interest rates for limited company Buy-to-Let mortgages will vary from lender to lender. The rate will depend on the size of the mortgage in relation to the property value and on the term of any fixed rate period. Rates are constantly changing as the market moves and more lenders become involved.

Lenders offering limited company mortgages tend to operate in a very niche marketplace. Therefore, generally, they can only be sourced through a mortgage broker or intermediary.

 

There are four SIC codes that can potentially relate to property letting:

  • 68100 – Buying and selling of own real estate
  • 68201 – Renting and operating of Housing Association real estate
  • 68209 – Other letting and operating of own or leased real estate
  • 68320 – Management of real estate on a fee or contract basis

Lenders can differ in their requirements, but typically Buy-to-Let lenders will expect a limited company to be registered under:

  • 68100 – Buying and selling of own real estate or
  • 68209 – Other letting and operating of own or leased real estate.

To minimise risk, most lenders prefer a limited company that exists as a special purpose vehicle (SPV). This is because it won’t have any other trade or revenue streams going through it. In the vast majority of cases, this means a newly incorporated limited company is solely dedicated to your Buy-to-Let business and has an appropriate SIC code for property letting.

If you do have an existing limited company with a trading history, some lenders may be willing to accept it, normally on the condition that no other trade or revenue streams, other than the Buy-to-Let business, will go through the company going forward.

A very small number of lenders will accept an existing limited company with other revenue streams in addition to the Buy-to-Let business.

There is no limit to the number of properties you can hold within a limited company. In fact, operating as a limited company can be more advantageous for landlords with a portfolio of several properties. This is due to the potential tax efficiencies it affords when comparing it to a standard Buy-to-Let.

Some lenders do not require a limited company to be incorporated before you apply for an Agreement in Principle. However, you will likely be better placed if this has been done.

You can transfer Buy-to-Let property that you own personally to the limited company. However, this effectively means selling the property as an individual, and purchasing it via the limited company.

This can leave you personally liable for capital gains tax on the sale and the company liable for stamp duty on the purchase.

It is important to weigh the pros and cons of transferring a property before proceeding. We recommend you seek professional advice regarding your tax affairs prior to making any decisions.

Contact us

Request a call back from our team by entering your details below and we’ll be in touch soon.

Alternatively phone us on 01473 356 284.

All required fields are marked with an asterisk (*).

Contact us

Consent(Required)
This field is for validation purposes and should be left unchanged.