10 Things You Should Consider When Buying Property Through a Limited Company

Buying Property Through a Limited Company

⏱️ 15 minute read

📅 Written on Aug 4th 2020

Looking to get started as a property investor?

Work your way through our 6 part property investing guide for beginners

Part 1:

 

How to create a property business plan

Part 2:

 

2020 Property Investment Strategies

Part 3:

 

Calculate Yield & ROI on Investment Property

Part 4:

 

Buying Property Through a Limited Company

Part 5:

 

Best HMO Investment Areas in the UK

Part 6:

 

How to flip a house as a property investor

Chapters

Chapter 1

Disclaimer: You should speak to an accredited accountant to get suitable advice for your situation. I am not a registered professional and this is not tax advice. 

 

The property market has gone through drastic change over the past few years.

 

Traditional amateur investors who have 1 or 2 properties in their own name are paying more tax. 

 

The government have removed tax relief on mortgage interest for property in personal names. 

 

It feels like a shift to ensuring landlords operate more professionally.

buying property through a limited company

This guide will cover the recent shift with property investors buying through limited companies.

Only 5 years ago there was barely any choice in the market. Most mortgages were for personal buy-to-let. Limited company mortgages were expensive and non-competitive.  🙅‍♂️

 

In 2015, the government announced their summer budget. This changed treatment of tax relief on mortgage interest. This created a shift in the market 📊. Before, landlords could claim interest as a deductible expense with property in their own names. Over time this would be phased out. 

 

The great news is… this doesn’t apply to limited companies! 🙌

 

The reality is, a limited company won’t be for everyone. Naturally to run a company will cost a bit more. This means accountants fees and other various costs. 🧮

 

Getting the right company and tax structure set up should be the key focus 🔑 for every new investor. At least if you aim to take it seriously and long term. 

 

Ensuring you are set up correctly could make a large difference in the tax you pay. This includes if you pass away. 

 

A big factor to consider is whether you’re a standard or higher rate taxpayer. To check out the latest rates view the Gov.UK website.

 

If you’re a higher rate taxpayer, it is likely to mean if you flip a property, you’ll pay more tax. Versus through a limited company which can save 💷 you money. View the latest corporation rates here.

Chapter 2

Should I buy a property through a limited company?

There are 3 key areas to explore as to whether you should consider thinking about buying property through a limited company

 

Tax

If you own a property in your personal estate, profits you make are added to earnings. This means if you’re a higher rate taxpayer, you’ll pay more 🤑 tax. 

 

However, if it’s held via a company, profits are taxed at corporation tax rates. This is usually HALF of the higher rate taxpayer rate. Hence saving 🐷 a lot of money. 

 

If you take out dividends from a company, a small amount is tax-free. The rest is a MUCH lower rate. Check out the dividend tax brackets here.

Property Business Plan

I wrote a fantastic guide on putting together and understanding your property business plan and strategy. 

 

If your aim is to become a full-time investor. A limited company may be best for you. This allows you to keep money within the company and minimise tax. 

 

Alternatively, you can legitimately wipe off a lot of expenses that become non-taxable. A savvy accountant will be able to help you with this.

Inheritance & Succession Planning

One thing a lot of professional investors don’t think about is succession planning. 👴

 

What happens as you get older? Or if you passed away. Would your hard work and portfolio be taxed heavily? 

 

Again having the right setup here will mean your children or family inherit a better size of the wealth generated by having the right structure.

Goal Setting Guide

Free Goal Setting Guide

Are you struggling to find focus in your property business? Do you have a clear, tangible and measurable plan of action? Download this free handy goal setting guide that explores wherey you are today, your financial literal and north star lateral goals – and what you need to do to bridge that gap to meet your goals. 

Chapter 3

Should I invest in property in my own name?

Although the benefits sound great for having a limited company. Let’s explore why you might NOT ✋ want to invest through a company. 

 

🏛️ Product Availability 

Even though the budget was announced 5 years ago and the shift started then. It’s a relatively new change for investors, lenders and the market.

 

This means that the commercial mortgage market is still catching up. Rates ARE getting better every day. But it’s taking time ⏱️ for banks to catch up. 

 

It also means a bit more paperwork 📃 through a company and a few extra hoops. But things are improving.

 

Brokers are now suggesting that up to 80% of buy-to-let applications are now through limited companies. So banks are responding to this with competitive rates. 💯

 

As investors move into the limited company direction, lenders have to follow. 

 

It’s quite likely you’ll need to give a personal guarantee to the lender. They will also trawl through your personal accounts. So your company won’t shield you personally. 🤠

 

But it will help you from a tax perspective.

 

Changes in Dividend Tax Rates

 

Dividend tax rates used to be very generous 💰. They’re decreasing year on year at the moment. However, if you want to keep the money in the company, just pay tax on your profits.

 

Then you can leave the rest to save up for another property. 🏠

 

If you intend to take money out of the company to spend, you’ll be taxed on the dividends. Or salary, depending on how you pay yourself.

 

Running costs & complexity

 

A famous saying is that accountants are worth their weight in gold. The aim of an accountant is to ensure your company is set up correctly. ☑️

 

And you’re maximising your tax allowances. To pay as little tax 🤏 as possible. 

 

But, this means just to keep the lights running you could be paying £1000+ just for your annual accounts. 

 

It also means you’ll have varying extra paperwork to sort out. And to keep costs down you might have to do your own bookkeeping. 📚

Join the community on Instagram

Follow my journey & say hello! 👋

Get the latest scoop on what’s happening and say hello!


The ultimate way to get all of the latest ups and downs of property investing.


Learn from all my mistakes AND successes to help you create a property portfolio or optimise your existing one.


Get inspiration on slick interior design, all while mingling with like-minded investors.


See you on the other side.

wtfpropertyinvesting1.4K followers🏡 What The Flip: Property Investing 🏗️ S. Yorkshire 👇 YouTube & Newsletter 🌿 Giant Leaps Begin with Small Steps
2
41
#7daysofproperty DAY FIVE – Highlight of 2020 🚀Starting a YouTube channel YouTube.com/mattbrighton📽 Kind of property related – I launched a YouTube channel this year, it’s something I’ve always wanted to do but never quite found the right topics to talk about. It clicked this year that I really wanted to document the property happenings, the things I learn and share my journey with others so they are inspired to get started.🤯 After only 2 full months the channel has already gained 220 subscribers and is growing faster than I anticipated, but subs aside, I’m enjoying putting out helpful content and have had so many lovely DM’s and comments thanking me for tips that people have picked up and things they’ve learnt which is awesome to know that already the content is having an impact.😃 I just released my latest video on buying a £600k flat in London at 25 with numbers, details and my story.👉 Feel free to check it out! Link in bio or YouTube.com/mattbrighton#hmo⁠ #coliving⁠ #property⁠ #properties⁠ #propertybusiness⁠ #propertydevelopment⁠ #propertydeveloper⁠ #propertymanagement⁠ #ukproperty⁠ #propertyinvestment⁠ #propertyinvestor⁠ #propertyinvesting⁠ #propertypodcast⁠ #buytolet⁠ #landlord⁠ #financialfreedom⁠ #passiveincome⁠ #propertyladder ⁠ #ukpropertymarket⁠ #propertynews⁠ #propertymarket⁠ #business⁠ #entrepreneur⁠ #propertymanagement⁠ #entrepreneurship⁠ #entrepreneurlife⁠ #houseofmultipleoccupancy ⁠ #sharedhouse⁠ #spareroom⁠
5
77
#7daysofproperty DAY THREE – WHY 🚀🤷‍♂️Why did I get into the industry?I’ve always wanted to build a business and after studying graphic design at university I always thought about running a design studio. The problem in 2020 is that everyone can create basic stuff on photoshop, canva etc. The agency market is also super saturated.For me, property is a great way to be creative and expressive whilst at the same time, the product in its self is an investment that gains value over time.🥸 Escaping The Corporate LifeI have a great career in a bank but it’s not what I’d prefer to do for the next 40 years commuting into the city. I want the space, freedom and most importantly a golden retriever 😂. Creating a property business and content brand are my two creative outputs to create something that is mine where my efforts are directly awarded through the performance of the businesses I run.🤩 What does it allow?For me, the why really stems down to building something of my own and being incredibly proud of it. A business that I can enjoy working hard on, to the point where it doesn’t feel like ‘work’. And ultimately that allows me to make decisions when I want time off, how I use my time and protect myself in later years when I’m retired.#hmo⁠ #coliving⁠ #property⁠ #properties⁠ #propertybusiness⁠ #propertydevelopment⁠ #propertydeveloper⁠ #propertymanagement⁠ #ukproperty⁠ #propertyinvestment⁠ #propertyinvestor⁠ #propertyinvesting⁠ #propertypodcast⁠ #buytolet⁠ #landlord⁠ #financialfreedom⁠ #passiveincome⁠ #propertyladder ⁠ #ukpropertymarket⁠ #propertynews⁠ #propertymarket⁠ #business⁠ #entrepreneur⁠ #propertymanagement⁠ #entrepreneurship⁠ #entrepreneurlife⁠ #houseofmultipleoccupancy ⁠ #sharedhouse⁠ #spareroom⁠
25
69
#7daysofproperty👋 Hey everyone. Looking forward to another week of @insidepropertyinvesting 7 day challenge!🙋‍♂️My name is Matt, I’m originally from the north, however I have been living in London for just over 5 years. I work for a bank by day and spent a bit of time working in commercial lending so have seen the side that many have not when it comes to financing a business.🏡 I’m a brand new investor. I got the bug after buying my own flat in London and renting out the spare room. Having a lot of knowledge in the South Yorkshire area, I’m viewing properties next month with the hope of working on flips to eventually move onto a mixture of HMO, commercial to resi & mixed use and would love to build houses further into the future.📽 With quite a creative background, having a degree in graphic design and working in finance. I’m also documenting my journey and knowledge through a YouTube channel (YouTube.com/MattBrighton). The insta community is amazing but it’s far too easy to see other investors killing it with amazing projects and 10 years experience so I’m enjoying ‘being an amateur’ in public and showing my work which has resonated really well with a lot of people so far.I look forward to meeting others on the challenge! ⁠ #hmo⁠ #coliving⁠ #property⁠ #properties⁠ #propertybusiness⁠ #propertydevelopment⁠ #propertydeveloper⁠ #propertymanagement⁠ #ukproperty⁠ #propertyinvestment⁠ #propertyinvestor⁠ #propertyinvesting⁠ #propertypodcast⁠ #buytolet⁠ #landlord⁠ #financialfreedom⁠ #passiveincome⁠ #propertyladder ⁠ #ukpropertymarket⁠ #propertynews⁠ #propertymarket⁠ #business⁠ #entrepreneur⁠ #propertymanagement⁠ #entrepreneurship⁠ #entrepreneurlife⁠ #houseofmultipleoccupancy ⁠ #sharedhouse⁠ #spareroom⁠

Chapter 4

Should I buy a property in a limited company or my own name?

We’ve covered you should consider tax, your property business plan and succession planning.

 

There are a few other areas to think about, to help you understand your options. 🤔

 

💸 How much do you earn?

 

If you’re a higher rate taxpayer, then using a limited company is going to be appealing. 

 

It’ll save you on paying additional tax, and means more money to re-invest.

 

💷 Do you need income?

 

If you’re looking to pay yourself from your property straight away. It might not be the most tax-efficient way. However, if you keep it in the company, and let it save up. This could be way more beneficial. 

 

💰 Mortgage interest rates

 

The key change that created the industry shift into limited companies in the first place. 

 

If you want to claim all of your mortgage interest as an operating expense. A company is going to be better off for you. Especially if you’re a higher rate taxpayer. 

 

💀 Beyond your lifetime

 

Are you wanting to pass down generational wealth? Do you want to sell up once you retire?

 

Having properties in your own name means a huge inheritance tax bill for your children if that’s your plan. Therefore a company is better in this scenario if structured correctly. 

 

You should think about what you want to do as an exit strategy for your portfolio. As you get older and you have less patience for the stresses of property investing. 

 

What will you do? 🤷‍♂️

Chapter 5

In Conclusion

Hopefully, the message from this guide is… there are many variables.

 

It all depends on you 🙆‍♂️, your circumstances, your strategy.

 

Your choice in strategy and handling the money will determine which is best for you.

 

There are so many variables and factors to consider. Weigh up the pros and cons of both ways to invest in property.

 

I highly recommend speaking to an accountant to talk through your situation and plans. This guide should arm you with basic knowledge. You should use this to have a productive conversation with a registered professional.

A property newsletter you'll actually enjoy recieving

Follow my journey - packed with powerful learnings & free resources

📮  No spam, ever.   📅  1 email a week.   👋  Unsubscribe anytime.

Property Investing Newsletter

Goal Setting Guide

Goal Setting Guide

Hey! Download Your FREE Property Goal Setting Guide

Pop in your email and I’ll send you the free guide!

Get Your Free Property Viewing Checklist

The Newsletter & Community

Be a part of a supportive, wholesome group of like-minded people.