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  • Writer's pictureThe Cedar Crest Team

Advantages of Buy To Let Mortgages For Limited Companies


 

Advantages of Purchasing a Buy to Let through a Limited Company

 

Over 30,000 Limited Companies have been formed specifically for buy to let reasons in the past seven years, primarily as a result of legislation that limits the mortgage interest deduction for landlords who own property in their personal names.


Buy to let mortgages for limited companies offer several advantages. In this blog, we explore why buy to let mortgages within a limited company structure can offer financial and legal benefits for property investors.


 

Increased Tax Relief


Individual landlords used to be able to claim a maximum of 45% in Buy to Let Tax Relief, but that figure has now been reduced to 20% for high rate taxpayers. However, Limited Companies are unaffected by this modification. The tax paid through a Limited Company will be less than the tax on individual income if you are a top-rate taxpayer.


 

No tax on dividends £5000 for individuals


A new £5,000 tax-free dividend allowance will take the place of the dividend tax credit as of April 2016. This means that if you own investment properties through a Limited Company, you may be able to earn dividend income that is tax-free.


 

UK Property Mortgages

No income tax is due when profits are reinvested to buy more homes


Expand your Buy To Let portfolio while operating as a Limited Company because no income tax will be due on the retained earnings, allowing more money to be put back into more properties. The rate of corporation tax on trade profits, which is 25% in 2023–24, is lower than the rate of income tax, which is 40% for income between £50,271 to £125,140 in 2023–24.


 

Personal funds can be drawn back out of the company


Any investment you make into the Limited Company, such as the mortgage deposit, can be taken back out of the company as it can be classed as a Directors Loan. Make sure to check with your broker to ensure the lender accepts this.


 

Potential personal tax savings


Currently, the rate of corporation tax is 25%, which results in a lower tax obligation than paying income tax at the higher rate of 40%. Retaining funds in the limited business allows you to regulate the amount of revenue that is taken personally, potentially lowering your tax liability.


 

Easier change of ownership


The property will belong to the business. As a result, you can lawfully modify the  shareholders to meet your needs, such as by adding a new partner to receive investment capital or by buying out existing partners. Companies House makes it easier and faster to change ownership than when a private party sells a house.


 

Personal Expenditure


Mortgages that are held in a Limited Company are sometimes not regarded as “commitments” by some lenders and therefore allows your increased private borrowing.


 

Not in your name


You are not responsible for tenant debts such as council tax, utility bills, etc. because the Limited Company owns the property. These businesses typically write to the individual owner in an effort to collect payment, which has harmed people's credit reports. A Limited Company, however, offers more protection, privacy, and reduced accountability when it comes to the debts of renters.


 

>> LOOKING TO PURCHASE A PROPERTY AS A LIMITED COMPANY <<


Get in touch with one of our mortgage advisers today to learn more about your mortgage options.



Cedar Crest Ltd – telephone UK T: +44 (0) 203 883 1017,

HK T: +852 6645 4462 – email info@cedar-crest.co.uk


Your home may be repossessed if you do not keep up with repayments.

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