An individual higher-rate taxpayer receiving £15,000 rent and paying £9,000 mortgage interest is taxed on the full £15,000 at 40% (£6,000), with only a 20% credit on the interest (£1,800) — a £4,200 tax bill on £6,000 of pre-tax profit. The same property in a company pays corporation tax on the genuine £6,000 profit: £1,140 to £1,500 depending on the rate. The gap widens as interest rates and leverage rise.
The company structure has its own costs — corporation tax plus tax on extraction, accountancy, marginally higher mortgage rates — so the answer is genuinely case-specific. Basic-rate taxpayers with one modest property often stay personal; higher-rate taxpayers building leveraged portfolios usually incorporate. This is accountant territory and we insist clients take that advice; our role is to ensure the lending side of either answer is optimal.
A limited company structure can offer long-term advantages for landlords looking to grow and manage a property portfolio efficiently. We help you choose the right lending strategy and company structure for your investment goals.
Most company buy-to-let lenders prefer a clean Special Purpose Vehicle (SPV) with the correct structure and property-related SIC codes.
A property-only company is preferred by lenders.
New SPVs are accepted by most lenders.
We help ensure your SPV is correctly structured before applying.
The core test is the same as all BTL: rental coverage. Company BTL enjoys a structural advantage here — because the company pays corporation tax rather than higher-rate income tax, lenders apply the lower interest coverage ratio, typically 125% rather than the 145% applied to higher-rate individual borrowers. The same rent therefore supports a larger loan in a company than it does personally for a higher-rate taxpayer.
Directors give personal guarantees on the borrowing — standard across the market — and lenders assess the directors’ wider position: experience, income, credit. For contractor directors, this is where our day-rate assessment expertise applies directly; the personal income behind the guarantee is presented on the methodology that values it highest.
Moving a property you already own into your company is a sale at market value: stamp duty (with the surcharge) is payable by the company, capital gains tax may be payable by you, and the mortgage must be redeemed and re-lent to the company. For a single property the costs are often prohibitive; for larger portfolios, incorporation relief may shelter the CGT where the portfolio qualifies as a business — a specialist tax question on which proper advice is essential.
The practical pattern for many landlords is therefore: existing properties stay personal, new purchases go into the company. We arrange lending on both sides of that line and keep the whole portfolio picture coherent as it grows.
Company BTL products price slightly above equivalent personal BTL — the margin has narrowed considerably as the market has matured, and lenders including Foundation Home Loans, Fleet, Landbay, Quantum and Kent Reliance compete actively in the space. Arrangement fees vary more than rates and materially affect the true cost, particularly on shorter fixes.
The honest comparison is after-tax, not rate-sheet: a slightly higher company rate frequently delivers a better net return than a cheaper personal rate once Section 24 has done its work on the personal side. We model the whole position — rate, fees, ICR headroom and tax treatment — rather than comparing headline rates across structures that are not comparable.
A brand-new SPV is fine — virtually all company BTL lenders accept newly incorporated SPVs with the right SIC codes (typically 68100 and/or 68209), because the lending is underwritten on the property, the rent and the directors’ guarantees rather than company trading history. Setup takes days and we coordinate it with your accountant so it is lender-ready.
That is where the Section 24 advantage bites hardest, but the full answer involves your other income, how many properties you intend to hold, whether profits will be reinvested or extracted, and your long-term plans. Basic-rate taxpayers with a single property often stay personal. This is a decision for you and your accountant — we make sure the lending is optimal whichever structure you choose.
Lenders stress rental coverage against the borrower’s tax position. Companies pay corporation tax, so the interest coverage ratio applied is typically 125%, against 145% for higher-rate individual borrowers. The same rent therefore supports meaningfully more borrowing inside a company — one of the quieter advantages of the structure.
Yes — directors’ personal guarantees are standard across the company BTL market. The company owns the property and the debt, but lenders look through to the directors. Your personal income, credit and experience are assessed behind the guarantee, and for contractor directors we present that income on day-rate methodology where it helps.
Cautiously, and only with proper tax advice — the transfer is a market-value sale triggering stamp duty (with surcharge) and potentially CGT, plus full refinancing. For one or two properties the costs usually outweigh the benefit; for substantial portfolios, incorporation relief may change the arithmetic. The common-sense pattern for many landlords is existing properties stay personal, new purchases go in the company.
Yes — the directors’ income stands behind the guarantees and forms part of the assessment, particularly for first company purchases. We present contractor income on the day-rate basis with lenders who recognise it, exactly as we do for residential lending — the company wrapper does not change our approach to valuing your earnings properly.