Thinking about purchasing a property through your business? Buying property via a limited company has become increasingly popular, but it’s crucial to weigh the benefits, drawbacks, and process before making your decision.
In this article, we’ll break down the key information you need to know about buying property through your limited company.
Can You Buy an Investment Property Through a Limited Company?
Yes, using a buy-to-let mortgage, you can purchase investment properties through a limited company. In fact, this is often a more tax-efficient option for landlords.
Private individuals face tax rates of up to 45% on rental income, whereas limited companies can pay the lower corporation tax rate of 19%. Moreover, while individual landlords are no longer able to deduct mortgage interest from rental income for tax purposes, limited companies can still benefit from these deductions.
Advantages of Buying a Property Through a Limited Company
Tax Efficiency: Rental income earned through a limited company is taxed at the corporation tax rate (19%), which is typically lower than personal income tax rates of up to 45%.
Claimable Expenses: Expenses, including mortgage interest, can be classified as business expenses, providing additional tax savings.
Reduced Personal Liability: The property is owned by the company, meaning your personal assets are protected in the event of company debt.
Inheritance Tax Benefits: If passing on a property portfolio, owning properties through a limited company can provide inheritance tax advantages, such as Business Property Relief, potentially reducing or eliminating tax liabilities.
Disadvantages of Buying a Property Through a Limited Company
Higher Mortgage Rates: Lenders typically charge higher interest rates for limited company mortgages and may require larger deposits.
Limited Mortgage Options: There are fewer lenders willing to provide mortgages to limited companies, reducing your options.
Taxes on Withdrawn Profits: Accessing profits requires taking a salary or dividends, which are subject to income tax, increasing the overall tax burden.
No Capital Gains Tax Allowance: Limited companies don’t benefit from Capital Gains Tax relief. Instead, profits from property sales are subject to corporation tax.
Do You Pay Stamp Duty When Buying Property Through a Limited Company?
Yes, Stamp Duty Land Tax (SDLT) applies when buying property through a limited company. Residential property purchases attract an additional 5% SDLT surcharge, and non-resident companies face a further 2% surcharge.
Should You Buy Property Through a Limited Company?
Buying property through a limited company can offer tax benefits and protect personal assets, but it also comes with challenges like higher mortgage rates, reduced financing options, and additional administrative responsibilities.
This decision depends on your goals—whether you're building a property portfolio, looking for tax efficiency, or seeking liability protection. You should always speak to a tax specialist to look at your options before setting up a limited company to buy property.
Get Expert Advice from The Mortgage Social
At The Mortgage Social, we specialise in providing tailored advice to help you make informed decisions about property ownership, whether personally or through a business. Our expert brokers can guide you through the process, explore financing options, and ensure the best outcome for your unique circumstances.
Contact us today to discuss your options and find the right solution for your needs.
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