Since the introduction of Section 24 tax changes, an increasing number of landlords are purchasing buy-to-let properties through limited companies rather than in their personal name. But is a company structure right for you? In this guide, we explain how it works, the tax advantages, the costs involved, and when it makes sense.
For a broader overview, read our complete guide to buy-to-let mortgages.
What Is an SPV?
An SPV, or Special Purpose Vehicle, is a limited company set up specifically for the purpose of holding property investments. Unlike a trading company that carries out a variety of business activities, an SPV has a very narrow remit — typically just buying, holding, and managing rental properties.
When you set up an SPV for buy-to-let, the company is registered with Companies House under a relevant SIC (Standard Industrial Classification) code, usually 68100 (buying and selling of own real estate) or 68209 (other letting and operating of own or leased real estate). The company then takes out the mortgage and owns the property, with you as a director and shareholder.
Setting up an SPV is relatively straightforward and inexpensive. Company formation typically costs between £12 and £50, and can be done online in a matter of hours. However, the ongoing costs of running a limited company — including accountancy fees, annual returns, and corporation tax filings — should be factored into your calculations.
- 01
Register your SPV
Form a limited company at Companies House with SIC code 68100 or 68209. Costs £12–£50 and takes a few hours online.
- 02
Open a business bank account
Most lenders require the SPV to have a dedicated business bank account before the mortgage completes.
- 03
Apply for the mortgage
Work with a specialist broker to find a lender offering limited company BTL products. You will provide a personal guarantee as director.
- 04
Complete and manage
The company owns the property and receives rental income. File annual accounts, confirmation statements, and corporation tax returns.
Tax Advantages of a Limited Company
The main tax advantage of holding buy-to-let property through a limited company relates to the Section 24 mortgage interest restriction. Since April 2020, individual landlords can no longer deduct mortgage interest from their rental income before calculating tax. Instead, they receive only a basic-rate (20%) tax credit.
For a basic-rate taxpayer, the net effect is broadly similar. But for higher-rate (40%) and additional-rate (45%) taxpayers, Section 24 has significantly increased the tax burden. In some cases, landlords have found themselves paying tax on “profits” that do not actually exist after mortgage interest is accounted for.
A limited company is not affected by Section 24. Mortgage interest remains a fully deductible business expense, reducing the company’s taxable profit. The company pays corporation tax on its profits at 19% (for profits under £50,000) or 25% (for profits over £250,000), with marginal relief for profits between these thresholds. For many higher-rate taxpayers, this results in a significantly lower tax bill.
Other potential tax benefits include the ability to retain profits within the company for reinvestment without triggering a personal income tax liability, and more flexibility in how and when profits are extracted (for example, through a combination of salary and dividends).
| Factor | Personal ownership | Limited company (SPV) |
|---|---|---|
| Mortgage interest relief | Basic-rate tax credit only (Section 24) | Fully deductible business expense |
| Tax on profits | Income tax at your marginal rate (20–45%) | Corporation tax (19–25%) |
| Extracting profits | Direct — rental income is yours | Dividends or salary — additional tax applies |
| Mortgage rates | Typically lower | Premium of 0.25–0.75% |
| Running costs | Minimal admin | £500–£1,500/yr accountancy fees |
| Inheritance planning | Property in your estate | Shares can be transferred more flexibly |
Mortgage Availability for Limited Companies
The number of lenders offering buy-to-let mortgages to limited companies has grown substantially in recent years, reflecting the increasing popularity of this approach. However, the range of products is still somewhat narrower than for personal buy-to-let mortgages, and interest rates tend to be slightly higher — typically 0.25% to 0.75% more than equivalent personal rates.
Most lenders require you to provide a personal guarantee as a director of the company. This means that despite the limited company structure, you remain personally liable for the mortgage if the company defaults. Lenders will also assess your personal income and credit history, in addition to the rental income and the company’s financial position.
Lenders generally prefer newly formed SPVs with no trading history over existing trading companies. If you already have a limited company that carries out other business activities, it may be more difficult to obtain a buy-to-let mortgage through it. Setting up a new, clean SPV is usually the better route.
Costs and Considerations
While the tax benefits can be significant, buying through a limited company comes with additional costs that must be weighed up:
- Higher mortgage rates — as noted, limited company rates are typically slightly higher than personal rates
- Accountancy fees — a limited company requires annual accounts to be prepared and filed, as well as a corporation tax return. Expect to pay £500 to £1,500 per year for a property-holding SPV, depending on complexity
- Stamp duty — the same SDLT rates and surcharges apply whether you buy personally or through a company. For larger transactions (over £500,000), companies may face an additional surcharge
- Extracting profits — getting money out of a limited company triggers additional tax. Dividends are subject to dividend tax (8.75% basic rate, 33.75% higher rate, 39.35% additional rate), and salary payments attract income tax and National Insurance
- Transferring existing properties — if you already own buy-to-let properties personally, transferring them to a company is treated as a sale and purchase, triggering stamp duty and potentially capital gains tax. This can make it prohibitively expensive to move existing properties into a company
When Does a Limited Company Make Sense?
A limited company structure tends to be most beneficial in the following situations:
- You are a higher-rate or additional-rate taxpayer and the Section 24 restriction significantly increases your tax bill
- You are purchasing new buy-to-let properties (rather than transferring existing ones)
- You plan to build a larger portfolio and reinvest rental profits rather than drawing them as personal income immediately
- You want to retain flexibility around inheritance planning, as company shares can be easier to transfer than property ownership
For basic-rate taxpayers with one or two properties who plan to draw all rental income personally, the additional costs and complexity of a company structure may outweigh the tax benefits. Every situation is different, and we strongly recommend taking professional tax advice before making a decision.
To discuss your options with a specialist broker, complete our short online enquiry.
- An SPV (Special Purpose Vehicle) is a limited company set up specifically to hold rental property investments.
- Limited companies can deduct mortgage interest in full, unlike personal landlords affected by Section 24.
- Corporation tax (19-25%) is often lower than higher-rate income tax (40-45%) on rental profits.
- Company BTL mortgage rates carry a 0.25-0.75% premium, but tax savings often outweigh this for higher-rate taxpayers.
- Use a company for new purchases — transferring existing properties triggers stamp duty and capital gains tax.