Limited Company Mortgages
More landlords are choosing limited company mortgages because they have better tax treatment and it's easier to get a loan for renting a property. We have a guide that explains limited company mortgages, and we can help you if you need it.
Limited company mortgages are an increasingly popular way for landlords to manage their properties, benefiting from lower tax liabilities and better lending terms. This guide explains the advantages of holding a buy-to-let through a limited company and provides advice on accessing finance.
For existing properties owned in personal names, we advise on the ideal route for individual landlords. While we are not tax experts, we can offer tips on key questions to ask a buy-to-let tax adviser. It’s wise to consider the tax implications of owning a buy-to-let property before purchasing or remortgaging. Limited company mortgages may be a suitable option with proper guidance, but not always.
What is Limited Company Mortgages?
Limited company mortgages are a popular option for landlords seeking to fund buy-to-let properties. These mortgages offer significant tax benefits and specialist finance options that may not be available through personal purchases.
In these scenarios, the property’s ownership is held by the limited company entity rather than in an individual’s name. This results in distinct tax regulations and rules which must be considered.
By using a limited company mortgage, landlords can reap the benefits of these advantages while creating a profitable investment portfolio. Understanding these factors is critical when considering whether a limited company mortgage is an appropriate option for your investment strategy.
Alternative Tax Treatment
Limited company mortgages can be an advantage for landlords because they can benefit from lower taxes. Corporation tax rates are typically lower than income tax rates.
Therefore, landlords can save money on taxes if they own a property through a limited company rather than owning it personally.
However, it may not be beneficial for everyone, so it is important to consult with a tax specialist before making a decision. Factors such as personal tax rate, property yield, access to income, and investment goals should be taken into consideration.
Lenders are offering very good terms for borrowing
In 2017, the Government changed the tax rules for people who own a property that they rent out to tenants.
If you own a property and rent it out to tenants, the amount of tax relief you can get for your mortgage payments will depend on whether you bought the property as an individual or through a limited company.
If you bought the property as an individual, you might have to pay more tax on your rental income. However, if you bought the property through a limited company, you can deduct the mortgage payments from your rental income before you pay tax.
As a result, you might be able to borrow more money from lenders if you bought the property through a limited company. This is good news for landlords who want to save money on taxes or earn more money from their property.
Specialist Buy-to-Let Finance
Limited company mortgages are a kind of special finance provided by specific lenders who lend money for buying properties to rent out.
Usually, the companies applying for these mortgages are based in the UK with UK directors and shareholders.
But some lenders will also consider companies from overseas or UK companies that have directors or shareholders from outside the UK. There is usually a limit of four directors or shareholders for these mortgages, but some lenders don’t have a limit.
Range of Lenders
Different lenders, such as banks and specialist lenders, can offer mortgages to people who have a limited company. These lenders will assess the financial situation and trustworthiness of the company, including new ones. Shareholders and directors of the company are the actual borrowers and will also have their trustworthiness and financial situation reviewed. Lenders might ask for the directors or shareholders to sign a personal guarantee, as well as requiring the company to provide a security or debenture. People looking for a mortgage for their limited company should seek advice from an adviser who knows how to handle these kinds of applications to avoid delays.
Seeking Specialist Property Tax Advice
Transferring personal possessions to a limited company can significantly impact the associated taxes.
To make an informed decision, it is wise to seek the aid of financial experts such as accountants or tax professionals.
By reviewing your financial standing, they can offer suitable recommendations.
Seeking the guidance of a professional will enable you to optimise your investments and reduce your tax liability.
If you’re a landlord with lots of properties, you might consider using a limited company to manage them.
A specialist tax advisor can help you decide if this is a good idea and advise you on the best way to manage your investments to save on taxes.
Connect Mortgages Wiltshire can help you transfer your properties into a limited company structure and offer expert support and advice.
Contact us today to learn more.
In Conclusion
Landlords can benefit from getting limited company mortgages as it can provide better lending terms from lenders and tax advantages that can manage property investments effectively.
Seeking advice from a tax advisor and specialist buy-to-let mortgage adviser can help ensure that they are using the most efficient tax structures when using a limited company structure.
FAQ (Frequently Asked Questions)
In the UK, limited companies can receive tax benefits from having a mortgage because the interest is deductible from taxable profits. However, tax rules surrounding company mortgages are complex and vary based on factors such as the purpose of the mortgage and types of expenses incurred. Recent changes to the tax system may limit certain companies’ benefits from a mortgage. For those considering a mortgage for their company, it’s important to seek professional advice from an accountant or tax specialist.
Yes, companies can get mortgages. Banks and building societies have solutions for businesses and landlords who use a limited company structure for their property portfolio.
The deposit amount needed will vary depending on the lender and type of property. For limited company buy-to-let mortgages, a higher deposit is typically required, usually at least 20-25% or more. Having a lower loan-to-value ratio gives investors more options.
We can help you find the best buy-to-let lender for your needs, and they have experience working with limited companies. They have access to different lenders with specific expertise in this area. Their team of experts will guide you through the process and help you find the right lender.