A Guide to Buy To Let Mortgages for Limited Companies

Starting a property portfolio can be a sound financial move. You might be a landlord starting a buy-to-let portfolio, or a limited company looking for property assets to generate extra income. Either way, buy-to-let properties can help you bring in a new revenue stream and add some stability to your equity and finances.But to purchase a buy-to-let property, you’re likely to need a mortgage. 

So, what mortgages are available? And what advantages do buy-to-let limited company mortgages offer when you’re looking for finance?

Let’s start by looking at what a limited company buy-to-let mortgage is.

What is a limited company buy-to-let mortgage?

Generally, a buy-to-let mortgage is taken out by an individual landlord to fund the purchase of a new rental property. A limited company buy-to-let mortgage is similar but the mortgage is taken out by a limited company, not an individual.

Using the limited company option has several tax and liability advantages (more on these in a moment). These benefits have made limited company mortgages an increasingly popular option for property investors.

Do you need to be a company director to apply for a buy-to-let mortgage for your business?

To apply for this kind of mortgage, you obviously need to be the director of a pre-existing incorporated company. Or you may need to register a brand-new limited company specifically for these purposes.

Why choose a limited company structure for buy-to-let properties?

When you opt for a limited company buy-to-let mortgage, you have all the tax, planning and liability advantages of being a registered limited company. These benefits provide a strong incentive to go down the limited company, rather than personal, route.

Let's take a closer look at what these advantages are, and how they offer a less risky route to property ownership for many landlords

Tax advantages:

Going the limited company route can help you cut your tax liability. In real terms, you pay less in tax and increase the margins you’re making from rental revenues.

• Corporation tax vs income tax: your income as an individual gets taxed through the income tax system. This can be as high as 45% for high earners. As a limited company, you pay corporation tax on any profits you make. This can be as low as 19%, if your profits are under £50,000 per year. 
• Retaining profits to drive reinvestment: when you reduce your tax liability, you free up cash that previously would have gone to HM Revenue & Customs (HMRC). This capital can be kept in the business and reinvested in your long-term growth strategy.

Inheritance planning: 

Owning your buy-to-let property through a limited company makes it much easier when you’re handing over ownership or shares to the next generation.

• Enhanced estate planning: Owning the property through a company gives you more flexibility in terms of estate planning. You can easily transfer shares to beneficiaries or adjust their shareholdings as needed.
• Access to business property relief: If your company meets certain criteria, you may be able to apply for Business Property Relief (BPR). Under BPR, the value of the company shares (which represent the property ownership) may be exempt from Inheritance Tax (IHT) when passed on to your beneficiaries.

Interest deductibility: 

Taking out a mortgage means paying interest on the money you’ve borrowed. The more interest you pay, the higher the repayments and the smaller your profits. But if you’re a limited company there’s a way around this. 

• Claim back your interest expenses: Full mortgage interest can be claimed as a business expense via a limited company – something you can’t do under personal ownership​. This saves you money and boosts your profits.

When would a limited company structure not be suitable?

Choosing a limited company structure does have many plus points, but it’s not always the most beneficial option. There may be scenarios where a personal mortgage is a better choice and will deliver a better return.

For example:

• Small portfolios: If you own one property (or a very small number of properties), the administrative burden of setting up a limited company may outweigh the benefits.
• Low-value properties: The benefits of Business Property Relief BPR might not outweigh the costs of running a limited company for low-value properties.
• Short-term investment horizon: If you plan to sell the property in the short term, the tax advantages of a limited company might be outnumbered by the costs and complexities of having to run an incorporated business.
• Limited financial expertise: Managing a limited company requires some level of financial and administrative knowledge. If you lack the time to manage the company effectively, it may not be the right choice.
• Low income/low tax bracket: If your income tax rate is relatively low, the potential tax advantages of a limited company may not be significant.

How do limited company mortgage interest rates compare to individual buy-to-let rates?

Low interest rates on mortgage payments help keep down the costs and drive the best possible profits on your investment. But rates for limited company mortgages are generally higher than individual buy-to-let rates, due to the perceived risk.

It’s important to shop around when looking for the right lender. Business loan interest rates can vary greatly across the market, so it’s advisable to talk with a broker who knows the market..

The below factors can have an impact on the rate you pay:

• Loan-to-Value (LTV) ratio: Lower LTVs generally result in lower interest rates.  
• Property type: Rates may vary depending on whether the property is a house, flat, house in multiple occupation (HMO), or commercial property.
• Rental income: Lenders will look at your property's rental income to make sure it can cover the mortgage repayments.  
• Borrower's creditworthiness: The creditworthiness of the limited company will influence the interest rate offered, so your business credit score is important. 
• Current economic conditions: Interest rates fluctuate based on economic factors such as inflation and the base rate set by The Bank of England (BoE) .

The current BoE base rate is 4.5%, but you can expect rates of between 5% to 8% and higher. Always speak to more than one lender, so you can compare rates and terms.

What is a Special Purpose Vehicle (SPV)?

A Special Purpose Vehicle (SPV) is a limited company specifically created to own and manage a single property, or a small portfolio of properties. Using an SPV brings you the core benefits of a limited company structure, including specific tax advantages. 

SPVs can be a simple way to set up a limited company as they’re designed for a single, specific purpose – in this case, property investment. It does mean careful consideration of the company's Articles of Association to make sure  they align with this limited scope .

Using an SPV does offer several benefits:

• Separate legal entity: The SPV is a separate legal entity from its owners. This gives you limited liability, meaning you’re not personally liable for the debts or liabilities of the company.  
• Asset protection: By placing your properties in an SPV, you create a legal barrier between your personal assets and the liabilities associated with the property investment. 
• Tax advantages: As with a straightforward limited company, you’ll pay corporation tax on your profits, at a much lower rate than paying income tax on your income. You may also qualify for Inheritance Tax (IHR) reliefs when passing shares on

What are the key considerations and costs for limited company mortgages?

A  limited company mortgage may sound like the perfect solution for your buy-to-let property purchase. The next step is to explore the practicalities of taking out a mortgage and what funding you’ll need to get started.

Is a deposit required for a limited company buy-to-let mortgage?

Yes, you’ll need enough capital to make a deposit against your limited company mortgage. 25% of the total cost of the property is usual, but you may need to pay between 30-40% of the asking price, depending on your risk profile.

Are there additional costs tied to limited company buy-to-let mortgages?

Yes, you will need to budget for additional costs above and beyond the mortgage deposit. Factor in the additional setup costs of incorporation fees, legal expenses and accountancy fees (your limited company will need to file accounts, remember).

Can you switch from a personal buy-to-let to a limited company structure?

Yes, you can transfer existing buy-to-let properties from personal ownership to a limited company structure in the UK. But it's a complex process that has some significant implications:  

• Transferring ownership: To transfer the buy-to-let property, you essentially ‘sell’ the property to your limited company or SPV. This triggers a Capital Gains Tax (CGT) liability, as you’re deemed to have made a profit on the sale of the property.  It’s possible to reduce this CGT by using available reliefs, like Principal Private Residence Relief or other allowable deductions.  
• Stamp Duty Land Tax (SDLT): You may be liable for SDLT on the transfer of the property to the limited company.  Getting advice from a tax specialist will help you understand the implications. 

• Mortgage implications: You'll need to transfer the existing mortgage from your personal name to the limited company. This may involve refinancing the mortgage, which could have implications for the interest rate on the mortgage and your repayment terms.  
• Legal and tax advice: Careful planning and expert advice is needed. Talking to your solicitor, accountant and/or a tax adviser is essential to understand the legal, tax and financial implications.

How to manage cash flow as a limited company landlord?

Switching from being an independent to a limited company structure changes how you manage your finances. The income you make from buy-to-lets is now the company’s money, and must be managed as such.

This means getting used to the concept of managing your cash flow and being in control of your cash inflows and outflows. This includes managing your rental expenses including maintenance costs, tax liabilities and mortgage repayments. 

To make this more manageable:

1. Think about getting cloud accounting software: This helps you record, track and report on your income, revenues, cash flow and forecast your profits.
2. Work with a bookkeeper or accountant: Accounting apps make financial management easier, but working with an expert adds real value.
3. Run regular cash flow statements and forecasts: You accounting app can run cashflow statements, so you can track and forecast your cash position.
4. Be aware of Making Tax Digital for Income Tax & Self Assessment: In April 2026, it will become mandatory for UK-based landlords to comply with the MTD for ITSA rules. This means keeping digital records and submitting quarterly reporting to HMRC.

What else should you consider when becoming a limited company landlord?

Before you make the switch from being an individual landlord to a limited company landlord, it’s sensible to think about all of the potential implications and considerations.

Here are a few important things to factor in:

Portfolio size and its impact on lending terms

Having a larger portfolio of rentals can affect your lending criteria, interest rates and deposit requirements when approaching a lender. 

As a limited company landlord, a large portfolio can sometimes lead to higher interest rates on repayments, stricter LTV (Loan-to-Value) ratios and more rigorous financial scrutiny from the lender. 

Green mortgage options for limited company landlords

Some lenders offer ‘green mortgages’ with potentially lower interest rates for energy-efficient properties. These mortgages may be available for properties with high Energy Performance Certificates (EPCs) or those with specific green features.

Exit strategies for limited company property investments

With a limited company in place, the management of your portfolio is taken care of. But what happens to your properties and shares if the business is sold or dissolved?

Let’s look at three different scenarios:

1. If you transfer your shares, the ownership of the properties held by the limited company is transferred to the new shareholder(s). The company remains intact and continues to trade, with new shareholders in place.
2. If the company is sold, the new owner acquires the company's assets, including the properties. As a shareholder, you’ll receive proceeds from the sale of the company based on the shares you hold.
3. If the company is dissolved, the company ceases to exist. Any company assets, including the properties, become ‘bona vacantia’ – property belonging to the Crown and can be sold off. 

Tax implications of holding properties personally vs. through a limited company

As a landlord, one of the major considerations will be the tax implications of running a buy-to-let property portfolio either personally, or through a limited company. 

For example:

• Corporation tax vs. income tax: You could pay up to 45% tax if your property income is taxed through your personal income tax. Switching to a limited company means you pay as little as 19% corporation tax on your profits. 
• Dividend tax when withdrawing profits: When profits are distributed to shareholders (including the landlord) as dividends, the shareholders are liable for dividend tax. You do have a dividend allowance of £500, but any dividend earnings about this threshold will be taxed through your income tax.
  
  • Basic rate taxpayers: 8.75%  
  • Higher rate taxpayers: 33.75%  
  • Additional rate taxpayers: 39.35%

Iwoca financing for limited company landlords

Opting to set up a limited company or SPV sets the foundations for running your property portfolio as a well-managed business. There are some additional responsibilities and costs, but these can be offlaid against the significant tax advantages and the peace of mind of limited liability.

At iwoca, our Flexi-Loans can adapt to your needs to support every step of your property investment journey, from bridging loans to covering the costs of incorporation fees, deposits or renovations.

Before making any decisions regarding your legal structure, it’s advisable to consult with your accountant, lawyer and tax adviser. 

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