Purchasing a buy-to-let property through a limited company
The team at ESPC Mortgages discuss purchasing a buy-to-let property through a limited company.
If you are considering purchasing buy-to-let properties under your own limited company, it is important you understand the advantages, disadvantages and responsibilities associated with this course of action.
We would always highly recommend clients seek independent tax and legal advice before proceeding at this course of action is not always the best way to proceed in all circumstances.
Advantages
The amount of buy-to-let tax relief for individual landlords has been cut in recent years for higher rate tax payers, but this change does not affect limited companies.
The tax-free dividend allowance for the 2020/2021 tax year is £2000, so clients can potentially receive some tax-free dividend from the limited company.
Disadvantages
There is no capital gains tax allowance when the company sells a property. Individuals would have a capital gains tax allowance, doubled where the property is owned jointly.
As a limited company, there will be additional costs involved. These would include preparation of company accounts, corporation tax calculations for HMRC, legal fees and annual auditing if applicable.
Many lenders currently do not offer mortgages for limited companies so there will be a restricted choice and possibly higher interest rates.
It is crucial a client gets independent tax and legal advice prior to considering this option.
ESPC Mortgages
As independent mortgage advisers, ESPC Mortgages can help with all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Contact us on fsenquiries@espc.com or 0131 253 2920.
ESPC magazine
This article appeared in the March 2021 issue of the ESPC magazine. Find out more about the ESPC magazine and read the latest issue online.
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The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.
The information contained within this website is subject to the UK regulatory regime and therefore restricted to consumers based in the UK.
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ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.