A common question we hear from landlords involves how to set up a limited company for a buy-to-let mortgage. In this guide, we will walk you through how it is done and what mortgage lenders are after to be able to lend to you.

Many landlords are now making the decision to purchase property through a limited company because of changes to the way landlords are taxed on buy-to-let properties. The limited company can be an existing trading company. More commonly, it will be a special purpose vehicle for holding and renting out property. This is otherwise known as an SPV limited company.

What is an SPV limited company?

SPV stands for Special Purpose Vehicle. An SPV limited company is one set up at companies’ house for the sole purpose of holding and letting out property. The vast majority of buy-to-let mortgage lenders will only lend to an SPV limited company. The reason for this is that these companies are set up for the specific purpose of renting out property. If a trading company applies for a buy-to-let mortgage, the matter becomes a lot more complicated, which is not attractive for most lenders.

There are, however, some specialist buy-to-let lenders that will consider lending to an existing trading company. If you want to purchase and hold property in the name of your trading company, you will find that the mortgage lenders are more limited in terms of your options. When we look at the options available to a client, we always offer a comparison of a provider that will lend to an existing trading company versus one that will only accept an SPV limited company.

How do you set up a limited company?

To formally set up a limited company, you will need to register it at companies’ house. This will involve specifying the company name, its registered address and the identities of the limited company directors.

You will also need to specify a business type. This is done by allocating a corresponding SIC code. For buy-to-let lending, the following SIC codes are required:

  • 68100 – BUYING AND SELLING OF OWN REAL ESTATE
  • 68209 – OTHER LETTING AND OPERATING OF OWN OR LEASED REAL ESTATE
  • 68320 – MANAGEMENT OF REAL ESTATE
  • 68201 – RENTING AND OPERATING OF HOUSING ASSOCIATION REAL ESTATE

Frequently asked questions about limited company buy-to-let

Which buy-to-let mortgage providers will lend to an SPV limited company?

Many high street banks will only provide mortgages to people purchasing property in their own name, so you will probably need a specialist buy-to-let lender to borrow through an SPV limited company.

With the popularity of owning property through a limited company on the rise, the number of mortgage providers that will lend to an SPV limited company is increasing. Think Plutus has access to the whole market of mortgage lenders so we are well-placed to secure the best finance for you.

Can my property portfolio be transferred from my personal name to a limited company?

In terms of long-term tax implications, it may be better to transfer your buy-to-let portfolio from your personal name to a limited company. The first thing to do is consult your accountant to ensure that paying the stamp duty and capital gains will be worthwhile for the income tax savings long-term.

The transfer of a property portfolio from your personal name to a limited company is viewed by mortgage lenders as a purchase. Fortunately, the lenders can use the equity you have in your properties as the deposit. However, you will probably have to apply to a specialist buy-to-let lender to take out a new mortgage on each of the properties in question. You will not be able to keep the mortgage with your existing lender and simply change ownership – you will need to pay off the current loan and find a new mortgage lender.

Is it necessary to provide a personal guarantee when taking lending through a limited company?

Limited company buy-to-let lenders always require you to provide a personal guarantee that the mortgage will be repaid in full. A limited company is merely a tax-efficient package; the lending is still underwritten on the director/primary shareholder of the limited company.

Will mortgage providers lend to a new limited company that has no account?

Again, it is the director/main shareholder of the limited company on whom the lending is underwritten – not the company itself. Some of our clients create a new limited company for every property they own as the directors may differ or they may wish to keep them separate for accounting purposes.

How much can be borrowed through a limited company buy-to-let?

Lenders are often able to lend larger amounts to limited companies. The stress tests they apply are often less stringent because of the different way a buy-to-let through a limited company is taxed. A handy calculation to use is annual rent ÷ 125% ÷ 5% to get a rough idea of the amount you can borrow. There are even more generous calculations available in some cases so be sure to have a conversation with your broker about your borrowing needs. They will match you with the right lender with the rent to loan calculation you need.

Does the limited company need a separate bank account?

Yes. You will need to set up a bank account for the limited company and mortgage payments will need to be made from this account.

How many directors/shareholders can I have in a buy-to-let limited company?

Most lenders will accept up to 4 applicants. In most cases, all shareholders with a shareholding of 25%+ must be named on the application.

Can a British ex-pat purchase property in a UK limited company?

Yes. Mortgage providers will lend to British ex-pats who wish to purchase property in the UK using an SPV limited company.

What property types can be mortgaged using an SPV limited company?

Mortgage lenders will lend on all types of property. This includes student lets, HMOs, commercial/semi-commercial property, multiple flats on a single freehold and single unit flats and houses.

Get in Touch

If you wish to learn more or discuss your limited company buy-to-let mortgage requirements, please don’t hesitate to contact Think Plutus. We can offer real expertise and specialist mortgage advice tailored to your requirements.

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YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.

We do not charge a fee for our advice, instead we charge for arranging your mortgage. Our typical fee is £495 depending on your circumstances. For insurance business we arrange policies from a panel representative of the whole of the market. Think Plutus® is a trading name of The Finance Planning Group Limited. The Finance Planning Group Limited is authorised and regulated by the Financial Conduct Authority (FCA). Registered in England No. 3894404. Registered office: Hurstwood Grange, Hurstwood Lane, Haywards Heath, West Sussex RH17 7QX. The FCA does not regulate most buy to let mortgages.