What you need to ask about buy-to-lets through a limited company?

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Like any other business decision deciding on the way you set up any investments or company structure will be down to individual circumstances.

As Letting Agents, we are often asked (especially since the changes to taxation on mortgage interest costs were introduced last year) what is the best way to proceed. Here are four key points we suggest you need to check with your property team before you make any decision:

  1. At a high level, managing your property portfolio through a Limited Company does mean that it is a separate legal entity (giving you some personal protection as long as you abide by the law!) and can offer lower rates of taxation, depending on your personal tax liabilities. However, research suggests that this tax saving only works if you are planning to have five or more properties in your portfolio. Only your individual calculations will tell you the answer.
  2. A handful of lenders do offer Limited company mortgages but they are usually at much higher interest rates than compared to personal borrowers. Larger landlords could find the tax benefits of being a limited company ownership balance or outweigh the higher cost of mortgage borrowing but if you are only intending on buying a larger portfolio so ask your accountant.
  3. If you already own buy-to-lets and are thinking about transferring them to a limited company you’ll need to consider sale and repurchase costs, which will include capital gains tax, stamp duty and any associated professional fees.
  4. Limited companies are potentially more expensive to run and will be publicly listed. Dealing with Companies House and formally filing accounts will incur accountant fees and you’ll also need to appoint directors and a company secretary, holding regular board meetings.

With no one size fits all solution it’s worth speaking both to a specialist tax adviser and an independent financial consultant who will assess your personal situation and advise on the best approach for you.

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