How SPVs, mortgages and costs shape buying to let through a limited company

A special purpose vehicle, or SPV, is an ordinary private limited company set up to do one thing: hold rental property. Lenders insist on the narrow purpose because it keeps the company's risks readable. Whether it beats owning in your own name is a tax question with a clear shape, and tax depends on your personal circumstances, so treat this as general information rather than advice.

Setting up the SPV

Incorporation at Companies House costs little and takes a day. What matters is the SIC code, the classification that tells lenders what the company does. Property SPVs use 68100, buying and selling of own real estate, or 68209, other letting and operating of own or leased real estate, and most landlords register both. A company with trading activity alongside, a builder that also holds flats for example, will find far fewer lenders willing to look at it.

The mortgage is the main running cost

Limited company buy-to-let is a smaller lending market than personal buy-to-let. Rates and arrangement fees are typically higher than the equivalent personal buy-to-let mortgage, and directors are almost always asked for personal guarantees, which means the company wrapper does not stop the debt reaching you if things fail. Price the actual company product against the actual personal product before deciding anything, because the mortgage gap eats tax savings fast on smaller portfolios.

Tax inside the company

The company deducts all of its mortgage interest as an expense, which is the whole attraction. The Section 24 restriction that limits individuals to a 20% credit on finance costs does not apply to companies. Profits then pay corporation tax at 19% up to £50,000, 25% above £250,000, and a tapered rate between via marginal relief.

Here's how the same deal looks under each ownership structure, using £13,800 rent, £2,500 costs and £6,000 mortgage interest.

The catch is that the £4,293 left belongs to the company, not to you. Take it out as dividends and dividend tax applies on the way through, so the company advantage is strongest for landlords reinvesting rents rather than living on them. One useful wrinkle: if you lend the company its deposit as a director's loan, the company can repay that loan to you from rental profits without any personal tax, because loan repayments are not income.

Stamp duty and admin

In England and Northern Ireland, companies pay the higher SDLT rates on any residential purchase, even their first, which adds 5 percentage points to every band. On a £250,000 purchase the surcharge is £12,500 on top of the £2,500 standard bill, £15,000 in all. Above £500,000 a flat 17% rate can apply to company purchases, though genuine rental businesses can claim relief back down to the higher rates. Then the recurring admin: annual accounts, a confirmation statement, and an accountant's bill every year that a personal landlord never pays.

Buying fresh is not the same as transferring

Everything above assumes the company buys the property from a stranger. Moving a property you already own into a company is a different and more expensive exercise, because the transfer itself triggers capital gains tax and SDLT, and we cover it in our separate article on transferring buy-to-lets into a limited company.

The clean decision rule: higher-rate taxpayer, reinvesting the rents, planning to hold long term points to a company. Basic-rate taxpayer or anyone spending the rental income usually does better personally. Run both versions of the sums before you make an offer, and when you are ready to buy, compare quotes from conveyancers who act on company purchases, because the lender's requirements add legal work a personal purchase does not have.