A limited company buy-to-let is a buy-to-let mortgage where the property is owned by a UK limited company rather than the borrower personally. The structure became dominant for new buy-to-let purchases following the introduction of Section 24, which restricted mortgage interest relief for individual landlords. Most lenders require the company to be a Special Purpose Vehicle (SPV), set up specifically to hold property rather than to trade in another business activity.
This extended definition explains what a limited company buy-to-let is, how the SPV structure works, and how it differs from personal-name buy-to-let. It does not address whether incorporation is preferable in any given case, as that is a tax and structural decision that depends on individual circumstances.
Key Insights
- The property is owned by a UK limited company, not by the borrower personally. The company takes the mortgage, owns the property, receives rental income, and pays corporation tax on profits.
- Most lenders require a Special Purpose Vehicle (SPV): a limited company set up specifically to hold property rather than trade in another business activity.
- SPVs are typically registered with [SIC codes](https://resources.companieshouse.gov.uk/sic/) 68100, 68209, or 68320, covering buying, selling, letting, and managing real estate.
- Section 24 does not apply to limited companies, so mortgage interest is fully deductible as a business expense before corporation tax, in contrast to the basic-rate-only relief available to individual landlords.
- Personal guarantees from directors are typically required by lenders, even though the borrowing entity is the company itself.
What a Limited Company Buy-to-Let Mortgage Covers
A limited company buy-to-let mortgage is taken out in the name of the company, with the property registered to the company at HM Land Registry and rental income received into a company bank account. The directors and shareholders are typically personally guaranteed and credit-checked, even though the company is the legal borrower. Affordability is assessed on the property’s rental income, with Interest Coverage Ratio benchmarks commonly around 125% for limited company borrowers (illustrative rather than universal, as lender criteria vary).
The lender pool for limited company buy-to-let is narrower than for personal-name buy-to-let, although it has expanded considerably as demand has grown. Limited company BTL rates typically sit slightly above equivalent personal-name products, often in the range of 0.2 to 0.5 percentage points higher, although the precise gap varies by lender and product. Deposits commonly start at 20–25% of the property value.
The structure removes the Section 24 restriction that affects individual higher-rate and additional-rate landlords. A company can deduct full mortgage interest as a business expense before calculating corporation tax, whereas an individual landlord’s mortgage interest is restricted to a 20% basic-rate tax credit. The trade-off is the additional ongoing cost of running the company, including annual accounts and corporation tax filing (commonly £600–£1,500 per year through a property-specialist accountant), Companies House confirmation statement filings, and dividend or salary extraction tax where profits are drawn out personally.
Why SPV Structure Matters
A Special Purpose Vehicle, usually shortened to SPV, is a limited company set up for a specific purpose, with its own legal identity and assets. For buy-to-let, an SPV exists solely to hold and let property. The company’s purpose is defined by its Standard Industrial Classification (SIC) codes, with three codes commonly used: 68100 (buying and selling of own real estate), 68209 (other letting and operating of own or leased real estate), and 68320 (management of real estate on a fee or contract basis).
Most BTL lenders require an SPV rather than a trading company. The reason is risk: a trading company carries unrelated business risk, with revenue, costs, and liabilities outside the lender’s view of the property. An SPV by contrast has a clean balance sheet limited to property and the related mortgage. Trading companies with property investment as a sideline are typically declined or routed to a smaller specialist lender pool. Larger portfolio investors sometimes hold each property in a separate SPV, which ring-fences each property’s mortgage and trading risk and supports cleaner refinancing and disposals.
SDLT and Tax Considerations
In England and Northern Ireland, SDLT treatment of limited company purchases differs in important ways from personal-name purchases. The 5% additional dwelling surcharge applies to a company’s first residential property purchase, since the first-property relief available to individuals does not apply to non-natural persons. The 2% non-resident SDLT surcharge can also apply where the company is treated as non-UK resident under the SDLT residence rules. For residential property over £500,000 acquired by a company, partnership with a corporate member, or other non-natural person, a 17% flat rate (increased from 15% on 31 October 2024) can apply in place of the standard SDLT bands, subject to reliefs including the property letting business relief.
Transferring an existing personal-name portfolio into a limited company is a separate set of considerations. The transfer is treated as a disposal at market value, which can trigger Capital Gains Tax for the seller, and an acquisition by the company, which can trigger SDLT including the additional dwelling surcharge. Incorporation relief and other CGT reliefs may apply where the existing portfolio constitutes a property business meeting HMRC’s tests. The interaction between Section 24, corporation tax, dividend tax, CGT, and SDLT on incorporation typically warrants specialist tax advice before any structural change.
Frequently Asked Questions
What is the difference between a limited company buy-to-let and a personal-name buy-to-let?
In a limited company buy-to-let, the property is owned by a UK limited company that takes the mortgage, owns the property, and receives rental income, with corporation tax payable on company profits. In a personal-name buy-to-let, the property is owned by the individual borrower in their own name, with rental income taxed as part of personal income. The headline practical differences are the tax treatment of mortgage interest (fully deductible against company profits versus restricted to a 20% basic-rate tax credit for individuals under Section 24), the rates and fees on the mortgage product (typically slightly higher for limited company products), and the ongoing administration (limited company structures involve annual accounts, corporation tax returns, and dividend tax where profits are extracted personally). The choice between the two structures depends on individual tax position, portfolio plans, and circumstances.
Why do lenders require a Special Purpose Vehicle for a limited company buy-to-let?
Most BTL lenders require the company to be a Special Purpose Vehicle, registered with one of the standard property SIC codes (68100, 68209, or 68320). The reason is risk transparency: an SPV by definition holds only property, with a clean balance sheet that is straightforward for the lender to underwrite. A trading company, by contrast, carries revenue, costs, and liabilities from unrelated business activity, which sits outside the lender’s view of the property and adds underwriting complexity. Lenders typically decline applications where the company has trading activity unrelated to property, or route them to a smaller specialist pool with different criteria. The SPV requirement is structural rather than nominal, and the SIC codes registered at Companies House are typically checked at application stage. Where a borrower already has a trading company, a separate SPV is usually set up specifically for the buy-to-let purchase.
Can UK expats use a limited company buy-to-let structure?
Yes, limited company buy-to-let is widely used by UK expats, and limited company ownership has become the dominant structure for new BTL purchases by overseas-resident British nationals. The expat overlay sits on top of the standard limited company BTL framework: lender approved-country lists, foreign-currency income discounts where personal income is used, and overseas address verification all apply alongside the SPV requirement. The lender pool narrows further compared with UK-resident limited company BTL, since both the expat overlay and the limited company overlay narrow eligibility independently. Section 24 applies equally to UK-resident and non-resident individual landlords, so the tax rationale for limited company structure is broadly similar across the two groups. Foreign nationals with no British ties can also use limited company BTL structures, although the lender pool narrows further again.
Important Considerations
The information in this entry is general educational reference only and does not constitute regulated mortgage, tax, or legal advice. Lender criteria, ICR thresholds, deposit requirements, SPV structuring rules, and the relative tax merits of limited company versus personal-name ownership vary considerably and depend on individual circumstances. The interaction between Section 24, corporation tax, dividend tax, capital gains tax, SDLT, and inheritance tax planning is complex, and incorporating an existing portfolio carries one-off costs that warrant specialist tax advice.