Limited Company Buy-to-Let Mortgage Advice
Purchasing buy-to-let properties through a limited company (SPV — special purpose vehicle) has become the standard approach for higher-rate taxpayers building a property portfolio since the 2017 mortgage interest tax relief restriction. In a limited company, mortgage interest remains a fully allowable business expense. For a 40% taxpayer with a 350,000 BTL mortgage at 5% interest, the annual tax advantage of company versus personal name is approximately 3,500 — 35,000 over a 10-year hold period.
The Tax Case for Limited Company BTL
Before 2017, landlords could deduct mortgage interest from rental income before calculating tax at their marginal rate. Since the restriction was phased in from 2017 to 2020, individual landlords only receive a 20% tax credit on mortgage interest — meaning higher-rate taxpayers lose the additional 20% relief they previously received. A limited company pays corporation tax (currently 19% to 25%) on net profits after interest, not income tax at 40% or 45%. The effective rate on profits in the company is lower. Capital retained in the company for reinvestment avoids the immediate dividend tax that extracting profits would create.
| BTL Tax Comparison (Higher Rate Taxpayer) | Personal Name | Limited Company |
|---|---|---|
| Annual rental income | £18,000 | £18,000 |
| Annual mortgage interest (5% on £280k) | £14,000 | £14,000 |
| Net profit before tax | £4,000 | £4,000 |
| Mortgage interest relief | 20% credit (£2,800) | Full deduction |
| Taxable income | £18,000 (40% rate) | £4,000 (19–25% corp tax) |
| Tax payable | £4,400 | £760–£1,000 |
| Net income after tax | £1,400 | £3,000–£3,240 |
When Limited Company BTL Makes Sense
Limited company BTL is most beneficial for: higher-rate taxpayers (40% or 45%) with one or more existing properties; buyers building a portfolio of 2 or more properties; investors who plan to retain profits in the company rather than extract them immediately; buyers who are structuring long-term inheritance planning around property assets. Basic-rate taxpayers with a single property rarely benefit from the additional complexity and cost of limited company structure. We model both approaches with your specific income, tax position and investment plans before recommending.
Limited Company BTL Mortgages in Hampshire and Surrey
Limited company BTL mortgages are widely available from specialist lenders across our Hampshire and Surrey coverage area. The rate is typically 0.2% to 0.5% above equivalent personal name BTL rates, reflecting the additional administration. Most lenders require the company to be a Special Purpose Vehicle (SIC code 68100 or 68209) set up specifically for property — a trading company that also holds property creates complications with lender criteria. We access the full specialist BTL lender market and compare all available limited company products before any application.
Setting Up the Limited Company
A buy-to-let SPV can be set up for approximately 50 to 100 pounds via Companies House with the correct SIC code. Annual running costs: 800 to 1,500 per year for an accountant to file corporation tax and annual accounts. Director’s loan accounts allow mortgage deposits to be introduced from personal funds as a loan to the company, repayable when the company has profits. We advise on the company structure before any application is made, though we work alongside your accountant for the tax aspects — the company setup and running cost advice is part of our standard whole-of-market BTL service.
We provide mortgage advice. The tax calculation specific to your position should be confirmed with your accountant before any structural decision. We model the mortgage comparison; your accountant confirms the tax position. Call 01252 111 000 →