Best Buy-to-Let Mortgage Rates for Limited Companies

Buy-to-let tax relief changes

Prior to April 2017, individual landlords could deduct their entire mortgage interest costs as expenses against the rental income they earned. They would then pay tax at their personal tax rate on the remaining profits. The Government has been reducing this tax relief in 25% increments since 2017, and this relief is no longer available. The Government also introduced a 20% tax credit against the proportion of the mortgage interest which is not tax deductible.

Higher-rate taxpayers see the greatest increases, as the tax credit only provides a refund of 20% and not at the higher or additional rates of tax as per the system before 2017. Another consequence of the changes is that landlords now need to declare a greater level of income (their profit from their rental properties) and this could see some move into a higher income tax bracket.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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Are there are any disadvantages of using a limited company for a buy-to-let portfolio?

Landlords who use a limited company could pay out more than they will immediately gain. This is due to:

• Buy-to-let mortgages for limited companies typically charging higher interest rates than those for individual landlords.
• Transferring a landlord’s property from an individual’s (or couples’) name to that of the business makes them liable for stamp duty of:

Does a buy-to-let limited company have to pay stamp duty?

Yes, stamp duty is due on sales of property that are for buy-to-let use irrespective of whether this is for a business or an individual. The level of stamp duty for buy-to-let properties in England and Northern Ireland reduced as part of the stamp duty holiday. Current rates are:

Special purpose vehicles and their role in buy-to-let limited companies

Special purpose vehicles (SPVs) – also sometimes called special purpose entities (SPEs) or bankruptcy remote entities (BRE) – are a popular choice due to their simplicity and the fact that they exist solely for the purpose of buying, letting and selling of property. In addition, mortgage lenders find this type of company much easier to underwrite than other trading limited companies. Consequently, there are more mortgage options available for SPVs and interest rates tend to be better. While there are lenders who will underwrite trading limited companies, they typically will only consider those on a strong financial footing with at least two or three years’ accounts as a minimum.

It should be noted that some lenders will only consider mortgage applications from SPVs.

Mortgage lenders will not accept SPVs with more than four directors. In addition, each director will have to provide full personal guarantees that they will repay the loan if the SPV folds.

When the SPV is being incorporated with Companies House as a new limited company, it will be necessary to specify which of the UK’s standard industry classification codes (or SIC codes) best describes its purpose. Typically those used are:

• 68100 – Buying and selling of own real estate
• 62809 – Other letting and operating of own or leased real estate
• 68320 – Management of real estate
• 68201 – Renting and operating of housing association real estate.

Can a limited company get a buy-to-let mortgage?

Yes, this is perfectly possible although you may have to look further afield than the usual high street lenders in order to get the mortgage you want. Traditional banks and building societies much prefer to concentrate on the more straightforward mortgage market, so it will probably pay you to engage the services of a mortgage broker, who has a much wider and deeper view of the market, including specialist and niche products. 

A good place to start your search is our buy to let limited company mortgage comparison chart. 

Also bear in mind that, if you have an existing buy-to-let mortgage on the property, issues could arise when it comes to changing it from an individual to a company arrangement. The lender may be happy to switch the mortgage over to the company name when the property is transferred, but on the other hand, they may not, in that case a remortgage would be required with all the costs associated. Make sure you seek advice and speak to your lender before you take the plunge to make sure you're prepared.

How can I find the right buy-to-let mortgage for limited companies?

Once you've gone through the process of incorporating, you'll also find that your mortgage options change. You'll need to find an even more specialist product as not all BTL mortgages are available to limited companies, but as using companies or SPV’s has become more commonplace choice in the marketplace has grown, as lenders respond to rising demand.

This means it should be far easier for newly incorporated landlords to find the best buy-to-let mortgage deals available to suit their circumstances – check out our top rate charts to get started and make sure to seek suitable advice , and see if you can benefit from becoming a limited company.

I’m thinking of becoming a landlord, where can I find some basic info on this?

For aspiring landlords who are thinking of taking their first steps into the buy-to-let market, you can also read our Five steps to becoming a buy-to-let landlord guide. New landlords might also find our guide to Landlords’ rights and considerations helpful.