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In recent years, there has been a 3 per cent extra charge in stamp duty for landlords with additional buy to let property investment. Many landlords are starting to look at ways they can save money on their additional property investments. One way to do this is by setting up a company when buying a buy to let property.

If you set up a company for your buy to let property investment, you won’t have to pay income tax on the profits however you will have to pay corporation tax instead which is currently lower. This can really help to offset the halving of tax relief for higher band taxpayers. Towards the end of 2020, there was a spike in the number of landlords setting themselves up as limited companies to take advantage of this tax break. Mortgage lenders also recorded an increase in the number of buy to let mortgages issued to companies.

What are the advantages of setting up a buy to let company?

  • A limited company is legally separate from you as an individual so therefore so are its finances.
  • It is fairly easy and cheap to register a company with Companies House.
  • No income tax to pay on profits.
  • If your business fails you are only liable for the money invested in the company so you are more protected.

What are the drawbacks of setting up a buy to let company?

  • You will need to provide annual accounts to Companies House.
  • You will need to supply a corporation tax return and self-assessment tax return as well.
  • You will have to disclose all information about the business.
  • There may be fewer mortgages available as not all mortgage providers will lend to a company.
  • Moving a property held in your name into the ownership of your company requires a sale and purchase process which will trigger a capital gains tax and stamp duty bill.
  • When you exit the business you will need to extract the value of your business and this can be complex.

If you are considering a buy to let property investment and setting up a company to do this then we would advise getting in touch. We can investigate whether this is the best option for your circumstances and find you the most suitable mortgage deals for you.

*Please note: Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Buy to Let mortgages.

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