Buying Your Home Through a Limited Company
What is a limited company?
A limited company is a legal structure that mediates between the business owners (shareholders) and the business.When you set up a business, you can operate as a sole trader or incorporate your business into a limited company. If you go for the latter, the limited company becomes a separate legal entity, meaning it can be sued or have debts. If this happens, you won’t be held responsible, and your business won’t have to sell its assets to pay the debts.
What does setting up a limited company involve?
You’ll need to register with Companies House to set up a limited company. You’ll also have to:
- Confirm who will be the director and shareholder (it can be the same person)
- Provide a company name
- Confirm if you’ll be the only shareholder or work with a partner
- Provide the company address (it can be your home address)
- Register your company as an employer with HMRC
Advantages and Disadvantages of buying a property through a limited company
Advantages |
Disadvantages |
1. Tax reliefIf you’re a landlord and own the property in your name, you must pay income tax on your rental income. The tax rate depends on income and can be up to 45%.However, if you own your property through a limited company, you must pay Corporation tax on your profits (19%). This is because you only pay tax on profits withdrawn from the company. |
1. Mortgage rates could be higherAlthough limited companies can take out mortgages like home buyers, lenders will charge higher interest rates. The bank considers lending money to a company riskier due to the reduced liability. |
2. Inheritance Tax benefitsPlanning to pass your property portfolio down to loved ones? If you buy your property through a limited company, you can avoid inheritance taxes. That’s because they can apply for Business Property Relief (BPR) to their income and assets. |
2. There is less mortgage availabilityBecause the bank sees buying a property through a limited company as much riskier, you’ll find fewer lenders willing to lend you the mortgage. |
3. Reduced liabilityBuying your property through a limited company reduces liability because the property won’t be in your name. So, if the company falls into any debt, you’ll only be responsible for the part you’ve invested in. |
3. You’ll pay taxes on money withdrawn from the companyYou must pay yourself a salary through the company to access your profits. This is considered income tax and counts as a cost when calculating your pre-tax profit for your company. |
4. Expenses can be claimed backExpenses on properties bought through a limited company are business expenses, meaning you can claim them back. One of these is mortgage interest. |
4. Moving between a limited company and personal ownership isn’t easyTo pass your property from your company to yourself or the other way around, you’ll need to transfer or sell it to the new owner (yourself) as an individual or a company. This comes with costs like Stamp Duty, Capital Gains tax and legal fees. |
5. Easier Portfolio Growth and FinancingExpenses on properties bought through a limited company are business expenses, meaning you can claim them back. One of these is mortgage interest. |
5. You won’t benefit from the Capital Gains Tax allowanceCapital Gains Tax (CGT) allowance doesn’t apply to limited companies, as these are subject to Corporation Tax when the profit is taken from the business. |
FAQs
-
Buying a home or investment property through a limited company can offer tax advantages and limited personal liability. This approach is often used by landlords and property investors. However, it involves more administration, higher mortgage rates, and fewer lender options. It’s important to assess whether this strategy aligns with your long-term goals when buying a home.
-
Yes, Stamp Duty Land Tax (SDLT) still applies when buying a new home or investment property through a limited company. In fact, companies may face additional surcharges, especially for second homes or buy-to-let properties. Always factor this into your budget when planning your property purchase.
-
When buying a home through a limited company, most lenders require a larger deposit—typically between 25% and 40% of the property’s value. This is especially true for buy-to-let mortgages. If you're considering investing in new homes through a company, be prepared for stricter lending criteria.
Our Offers to Help Get You Moving
Help to Sell
If you’re looking to start your next adventure, we have a range of schemes available to help you sell your existing home.
Part Exchange
We could be your guaranteed buyer, so no stress or fuss, just an easy move for you and your family.
Low Deposit Offers
If you have a low deposit, we have a variety of schemes available to help make moving more affordable.
Movemaker
We could help you arrange to sell your existing home, so you'll have no estate agent fees to pay.
