Purchasing a Buy to Let Property Through a Limited Company

Jun 10, 2024

Investing in a buy-to-let property can be a smart move. One option to consider is purchasing through a Special Purpose Vehicle (SPV) Limited Company. This method has its own set of advantages and disadvantages. Let's explore them.

Advantages

Tax Efficiency

When you buy a property through an SPV Limited Company, you might benefit from lower tax rates. Companies pay corporation tax on profits, which can be lower than personal income tax rates.

Mortgage Interest Relief

Individuals can no longer deduct mortgage interest from rental income to reduce tax liability. However, companies can still claim full mortgage interest as an expense.

Limited Liability

An SPV Limited Company separates your personal finances from your property investment. This means your personal assets are protected if the company faces financial problems.

property investment

Disadvantages

Setup and Running Costs

Setting up an SPV Limited Company involves costs. You will also need to file annual accounts and tax returns, which can add to your expenses.

Mortgage Availability

Not all lenders offer mortgages to SPV Limited Companies. You might face higher interest rates or stricter lending criteria.

financial paperwork

Running a company involves more paperwork. You will need to keep detailed records and comply with various legal requirements.

Capital Gains Tax

When you sell the property, you might face higher capital gains tax rates. Companies do not benefit from the same allowances as individuals.

Conclusion

Buying a buy-to-let property through an SPV Limited Company offers several benefits, including tax efficiency and limited liability. However, it also comes with additional costs and administrative responsibilities. Carefully weigh these factors to decide if this option is right for you.