LIMITED COMPANY BUY TO LET MORTGAGES
Owning property in a Limited Company can be tax efficient. We can help you secure Limited Company Buy To Let mortgages.
You will need a Limited Company Buy To Let Mortgage instead of a regular residential mortgage if you want to buy a property through a limited company. Instead of you own the property, it will be held by the firm. In reality, you might form a corporation to purchase investment properties. A particular purpose vehicle (SPV) is a corporation created for this purpose, and it can be a lucrative way to expand your property investment portfolio.
You put money into a property firm to buy to let after you set it up. This is used as a deposit on properties you buy, with a limited company buy to let the mortgage covering the balance of the cost.
It is vital to remember that when you acquire property in your name versus buying property through a limited business, the tax requirements are different. If you believe a buy-to-let property in your name, you must pay the following fees:
- If you sell the property for a profit, you will have to pay capital gains tax.
- Stamp duty is a tax levied on the purchase of a
- Rental income is subject to taxation.
You will not be taxed as an individual if you buy a residence through a limited corporation. Instead, you may have to pay Corporation Tax, which might be a more cost-effective alternative in some situations.
You must also decide on the type of Limited Company Buy To Let Mortgage you want, in addition to the tax ramifications. There are a variety of mortgage alternatives available, and Simply Bridging Mortgage Brokers can assist you in selecting one of the following:
A fixed mortgage rate, a variable mortgage rate, or a tracker mortgage rate are the three types of mortgage rates available.
There are two types of mortgages: interest-only and repayment mortgages.
A longer or shorter mortgage term is available. While a longer mortgage term may result in cheaper monthly mortgage payments, a shorter mortgage term may save you money in the long run.
Our mortgage brokers will supply you with a mortgage, a professional service, and a range of the finest mortgage options that will make it simple to choose, taking into account property revenue and private finance – as well as specific circumstances.
In the same way that a standard buy to let mortgage works, the principals are similar. The key difference being, rather than you the client owning the property, the limited company owns it. Since tax changes which were started to be phased in back in 2016/17. It has become significantly less attractive to own a property in personal name.
As of April 2020, you can no longer offset mortgage interest against your tax liability, meaning that you are now effectively getting taxed on the turnover of the rental income minus basic property maintenance costs.
Therefore, more and more landlords are either moving their portfolio into a Limited Company or buying new properties via a Limited Company.
This makes more sense as you pay corporation tax at 19% but only on the profit that the company makes which takes into account the interest costs.
This type of Limited Company is called a special purpose vehicle (SPV)
Following tax changes that took effect from 2016/17, this has become more popular but how does the selling of a property in personal names to a Ltd Company name work?
The first thing to be aware of is that the lender will allow you to gift the equity that you have within the property to the company way of a director’s loan and therefore the Ltd company does not have fund a deposit to buy the property from you. You will be liable for stamp duty on what is called the consideration which is effectively the amount of mortgage borrowed. It is also worth noting that you will be liable for capital gains tax on the sale. Always seek professional tax advice before undertaking this transaction.
When a limited business sells a property, there is no Capital Gains Tax exemption.
Running a limited corporation comes with added expenses. These costs include account preparation (which is required by law), Corporation Tax, filing at Companies House, legal fees, and, if necessary, annual audits.
We will be open and honest as usual. When it comes to Limited Company Buy To Let Mortgages, most mortgage lenders offer a somewhat higher mortgage interest rate and costs than when it comes to individual buy to let mortgages.
When it comes to weighing the benefits and drawbacks of your business, our mortgage brokers at Simply Bridging Mortgages will always give you experienced guidance and the best Buy to Let Limited Company Mortgage deals.
If you opt to form an SPV, which is a Limited Company set up at Companies House with the sole aim of holding property, you must ensure that it has the relevant SIC code, which your accountant may assist you on. The Standard Industrial Classification Code (SIC code) is an abbreviation for the Standard Industrial Classification Code. They are used to categorise the company’s business activity.
If the firm buying the property is currently trading and doing other things, getting a limited company buy to let mortgage is far more difficult.
Even though a Limited Company purchase to let is taken out in the company’s name, which has limited responsibility because it is a separate entity, most mortgage lenders will want personal guarantees from its directors and shareholders. You are assuring the lender that you’ll be personally accountable if the limited business defaults on its mortgage payments.
Call us to learn more about assisting you with your limited company buy to let needs. Please send us an email instead; we guarantee that we will respond to all inquiries the same day.