Murray Souter from ESPC Mortgages discusses purchasing a buy-to-let property through a limited company. 

The Shore

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

You may also be interested in...

ESPC Mortgages: Independent mortgage advice

Independent financial experts advising on mortgages & protection.

Buy to let mortgage advice

Our team can provide expert advice on buy-to-let mortgages. 

Is it illegal to rent out a house without a buy-to-let mortgage?

Wondering whether it's illegal to rent out a property under a residential mortgage? Our team at ESPC Mortgages look at this topic and advise what to do if you want to let out your residential home.

The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain. No individual mortgage advice is given, nor intended to be given in this article.

Buy-to-let mortgages are not regulated by Financial Conduct Authority and not covered by the Financial Services Compensation Scheme. They are however supervised, and applicants can complain to the Financial Ombudsman Service if they feel they have not been properly advised.

The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 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.

ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.