Limited Company For Property Investment
Limited Company Property Investment
Purchasing property through a limited company — typically a Special Purpose Vehicle (SPV) — has become the standard approach for many London property investors. The tax advantages are significant, particularly since the Section 24 mortgage interest restriction removed full interest deductibility for individual landlords. But the decision to use a company structure involves trade-offs in complexity, cost, and flexibility that must be understood before committing. This guide covers the tax advantages, compliance requirements, costs, and practical considerations.
Why Investors Use Limited Companies
Full Mortgage Interest Deductibility
The single biggest reason. Since April 2020, individual landlords can no longer deduct mortgage interest as a business expense — instead receiving a 20% tax credit. For a higher-rate taxpayer (40%) with £50,000 of rental income and £30,000 of mortgage interest, the Section 24 restriction increases the tax bill by approximately £6,000 per year compared to pre-2020 rules. A limited company is not affected by Section 24 — mortgage interest (and bridging loan interest) remains fully deductible against profits before corporation tax is calculated.
Corporation Tax vs Income Tax
Companies pay corporation tax at 25% (for profits above £250,000) or 19% (for profits up to £50,000, with marginal relief between £50,000 and £250,000). Individual landlords pay income tax at 20%, 40%, or 45% depending on their total income. For higher-rate taxpayers, the corporation tax rate is significantly lower than the personal income tax rate — creating an immediate tax saving on rental profits retained within the company.
Inheritance Tax Planning
Shares in a property company can be transferred to family members, placed in trust, or structured to mitigate inheritance tax liability. Direct property ownership does not offer the same flexibility — the property itself must be transferred, triggering stamp duty and capital gains tax.
Portfolio Growth
Profits retained within the company (rather than extracted as dividends) can be reinvested in further property purchases. This allows the portfolio to grow faster because the company retains more post-tax profit than an individual would. Many professional landlords with portfolios across Hackney, Walthamstow, Clapham, Balham, and Bermondsey use SPV structures specifically to facilitate portfolio expansion.
Setting Up an SPV for Property Investment
The process is straightforward. Register a new limited company at Companies House — this can be done online in 24 hours for £12 (or £30 for same-day incorporation). Choose appropriate SIC codes — 68100 (buying and selling of own real estate) and 68209 (other letting and operating of own or leased real estate) are standard for property investment companies. Open a business bank account — some banks offer dedicated SPV accounts (Tide, Starling Business, NatWest). Appoint directors — typically the investor and their spouse/partner. Issue shares — the shareholding structure determines how profits and capital are distributed.
Bridging lenders and buy-to-let mortgage providers routinely lend to newly formed SPVs — the company does not need a trading history. The directors provide personal guarantees, and the company’s beneficial ownership is verified through Companies House.
Costs of Running a Property Company
Company formation: £12-£30. Annual accounts and corporation tax return: £500-£1,500 per year (prepared by an accountant). Annual confirmation statement to Companies House: £13 per year. Business bank account: typically free or £5-£10 per month. Additional stamp duty: none — the company pays the same SDLT rates as an individual (including the 5% surcharge for additional properties). However, there is no first-time buyer relief available to companies. Director’s loan account management: if you lend personal funds to the company (e.g., for the deposit), this must be properly documented and managed.
The annual running costs of £500-£1,500 for accountancy are modest compared to the tax savings for higher-rate taxpayers — the breakeven point is typically reached when annual mortgage interest exceeds £5,000-£8,000.
How Bridging Loans Work for Limited Companies
The process is almost identical to personal borrowing. The lender assesses the property, the LTV, and the exit strategy — not the company’s trading history. The key differences are the directors provide personal guarantees (the loan is not truly non-recourse to the individuals), the company’s constitutional documents (articles of association) must permit property purchase and borrowing, and the lender takes a legal charge against the property and a debenture over the company’s assets.
We arrange limited company bridging loans from our office at 64 Knightsbridge, London. Rates and terms are comparable to personal bridging — from 0.45% per month for prime London property at conservative LTV.
When a Limited Company Makes Sense
A company structure is typically worthwhile if you are a higher-rate (40%) or additional-rate (45%) taxpayer, you plan to build a portfolio of 2+ properties, you intend to retain rental profits for reinvestment rather than drawing them as personal income, you want to facilitate inheritance tax planning, or the annual mortgage/bridging interest across your portfolio exceeds £5,000-£8,000.
When a Limited Company May Not Make Sense
If you are a basic-rate taxpayer purchasing a single property, the annual accountancy costs and administrative burden may outweigh the tax savings. If you need to access all rental income personally each month, extracting profits via dividends triggers additional personal tax — reducing the corporation tax advantage. If you already own properties personally and want to transfer them into a company, the transfer triggers stamp duty (on the market value) and capital gains tax — making retrospective incorporation expensive.
Extracting Profits from the Company
Profits retained within the company are taxed at corporation tax rates (19-25%). To access these profits personally, you can pay yourself a salary (deductible for the company, but subject to income tax, National Insurance, and employer’s NI), take dividends (taxed at 8.75% basic rate, 33.75% higher rate, 39.35% additional rate — but no NI), or repay a director’s loan (if you originally lent money to the company, repaying it is tax-free). Most property company directors take a small salary up to the NI threshold (approximately £12,570) and the remainder as dividends — optimising the overall tax position.
Compliance and Administration
Annual accounts must be filed at Companies House within 9 months of the financial year end. Corporation tax returns must be filed with HMRC within 12 months. Corporation tax must be paid within 9 months and 1 day. A confirmation statement must be filed annually confirming the company’s officers, registered office, and shareholding. All property rental income and expenses must be recorded and reported through the company’s accounts — personal and company finances must be kept strictly separate.
Frequently Asked Questions
Can I get a bridging loan through a newly formed SPV?
Yes. Bridging lenders routinely lend to newly formed SPVs with no trading history. The directors provide personal guarantees and the underwriting focuses on the property and exit strategy, not the company’s accounts.
Do I pay more stamp duty through a company?
You pay the same SDLT rates as an individual, including the 5% additional property surcharge. There is no extra company surcharge — but companies cannot claim first-time buyer relief.
Can I transfer my existing properties into a company?
Yes, but it triggers SDLT on the market value of each property and capital gains tax on any gains. This makes retrospective incorporation expensive and should only be done with professional tax advice. For most investors, it is more cost-effective to keep existing properties personally and purchase new properties through the company.
Do I need a specialist accountant?
A property-specialist accountant is strongly recommended. They understand the specific tax rules, reliefs, and compliance requirements that apply to property companies — and can save you significantly more than their fees through correct structuring and planning.
Does Platinum Global charge a fee?
No broker fee on facilities of £500,000 or above.
Get Limited Company Finance
Platinum Global Bridging Finance arranges bridging loans for limited companies and SPVs purchasing property across London. Whether you are acquiring your first investment in Brixton, expanding a portfolio across Stratford, Barking, and Tottenham, or purchasing a family house through a company in Hampstead or Richmond, we structure the finance to match your corporate requirements. Contact us at 64 Knightsbridge, London for indicative terms within 24 hours.