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Limited Company Buy to Let FAQ

Landlords nationwide are discussing the Advantages and Disadvantages of Limited Company Buy-to-Let. We will look at some of the questions raised.

Can I buy a property in a Limited Company?

Yes.  Lenders offer products for purchasing properties in companies.

Are Ltd company buy to let mortgages hard to get?

No. Mortgage lenders have products that can buy properties in a Limited Company.

There are less mortgage lenders but the criteria and products are wide ranging.

How do I set up a Limited Company?

You can ask your Buy to Let Mortgage Broker at Bespoke Finance to incorporate a company on your behalf.

Company Incorporation at Bespoke Finance is Free on Application.

You can incorporate from £15+VAT on-line or ask your accountant.

The company can not undertake any other activities, just the buying and renting of property.

As such you are required to use one of the following SIC codes:

When you incorporate you dont often provide a SIC code, if the lender requires it you can do so by filing on annual returns.

Ask your mortgage broker for advice.

A new company has no history or income!

That is right! Mortgage Lenders prefer a none trading companies.

They want a Special Purpose Vehicle (SPV) a company that does none thing - being your letting business.

If its a new company with no history - then that is perfect. If you already have a company renting property (only) then that is fine too.

If you already have a trading company, perhaps you are an IT Consultant. It will have history, liabilities and other activities.

That is risky to mortgage lenders.

How old does the limited company have to be?

Mortgage Lenders will accept limited companies as soon as they have been set up. We allow day 1 SPVs.

But... Id prefer my Trading Company to buy property?

You can! but your options will be limited.

Other options may include

You should talk to your mortgage broker to discuss such options. The route may be what the available lender prefers.

How is affordability assessed?

Lenders assess affordability on Limited Company Buy to Let mortgages on two things:

  1. You Personally! (and any other shareholders/directors)
  2. The Property.

Mortgage lenders affordability test is no different to buying in a personal name.

Lenders will want to ensure you have some income to cover void periods and others have minimum income requirements.

You will be credit checked as usual.

Lenders will stress test the rental income. ( How is Buy-to-let Affordability assessed? )

Limited Company means Limited Liability?

On application to a mortgage lender you will wave your "limited liability".

Every shareholder and director of the company will be required to provide a Personal Guarantee.

That means - if your rental company fails to pay the mortgage. They can then pursue you.

Will they take a charge on my home?

No. Providing a personal guarantee does not mean a lender will take a charge on your home.

If a lenders has to repossess a property in a limited company and is still owed money. The person offering the Personal Guarantee will be liable for that money.

This is the same if you buy in your own name.

How does the deposit work?

You will need a deposit! but how do you get it into the company.

Many mortgage lenders insist you GIFT the deposit funds to the company from your own savings.

Accountants prefer a different way.

Some mortgage lenders allow you to LOAN the deposit funds to the company from your own savings.

This will make your accountant happy, repaying the loan back to yourself from the company is tax free.

Ask your accountant for advice on tax proposition. Your mortgage broker will confirm which lenders allow which route.

Will I need a bigger deposit?

No. You can get Limited Company Buy to Let at 85% Loan to Value.

You will find better mortgage rates and more options at 75% LTV or lower.

Costs: Personal v Company

The costs for a Limited Company Buy to Let tends to be higher than in a personal name.

Your mortgage broker may charge extra, Bespoke Finance charges the same fee regardless.

A mortgage lenders Arrangement Fees and Mortgage Rates are typically higher for a Limited Company - from 1% to 1.5%.

In recent months this has started evening out. It was announced Aldermore was to join Paragon Mortgages in charging same interest rates.

Your Conveyancing Solicitor may charge higher fees. This is due to the increased legal complications. ( Why is Conveyancing more expensive? )

You will have Company Requirements such as filing Annual Returns and Filing Accounts. There is a small fee at Companies House. The greater costs are for professional accountants to complete these for you.

Who's Money is it?

A limited company has its own legal personality, which is separate to the individuals who participate in it.

You should establish a separate bank account for the separate legal entity.

You can not spend the rent the company earns on things other than business activities.

If you do so it will be a Wage or Benefit and this will effect your tax position.

It is the companies money. It is only yours when it is transferred to you and taxed accordingly.

How the Tax Work?

You need to talk to your accountant about Tax Planning in a Limited Company.

After legislative changes on Mortgage Interest Relief - Limited Companies became a popular option.

This arises as companies are able to "retain profits".

This allows you to plan with your accountant what the company will pay you. You can plan what your personal tax position will be.

Do I need a Separate Bank Account?

Yes. Your own bank should be happy to provide you with a Company Bank Account.

It is typically not a mortgage condition but can effect your tax position.

It will make easier separating the companies funds from your funds. Especially when filing accounts for simplicity.

How do I sell a property?

You can sell a property as you would do normally.

The profits will belong to the Limited Company and not you personally.

You can re-invest or withdraw monies and be taxed accordingly.

A different route is, you could sell the whole company. The buyer instead of buying the property, buys the company that owns the property.

You will need advice. Put simply you sell then the shares and on the same day the buyer re-mortgages.

The refinance will remove your personal liability on the existing mortgages.

What if I re-mortgage or get a 2nd Charge?

Any further equity you release will belong to the Limited Company and not you personally.

You can re-invest or withdraw monies and be taxed accordingly.

How many people can be part of the company?

You are typically looking at a maximum of Four Shareholders / Directors. Which opens up opportunities for Joint Ventures.

You can have more parties but lending options reduce.

Can I get Bridging Finance in a Limited Company?

Yes. Limited Company's can get bridging finance.

This is typically used if the property is uninhabitable and requires works to make it mortgageable.

Or if you require to purchase the property fast, such as in an auction.

Can I buy a HMO in a Limited Company?

Yes. Limited Companies can get mortgages for buying a House of Multiple Occupation (HMO).

At the time of writing Limited Companies can buy HMO properties at 85% LTV.

Can I transfer property from personal to Limited Company?

Yes and No.

You can not transfer them as a company is a separate legal entity.

You can re-mortgage the properties into a Limited Company.

Some lenders require you to have the deposit in cash. Others allow a paperwork transaction - using the same equity.

This can be known as "gifted equity" or in rare cases "loaned equity".

Talk to your Mortgage Broker about SDLT and Capital Gains

Speak to an Adviser

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