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. 📚

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Should you buy in a limited company or in your own name? 🤷‍♂️⁠ ⁠ This week I explore the key factors that affect whether a limited company is right for you. Different factors like tax, your income and your future property goals will make a difference. ⁠ ⁠ You should be thinking about:⁠ ⁠ ⚡ Are you a basic, higher or additional rate tax payer?⁠ ⚡ What long term plan do you have?⁠ ⚡ Have you thought about succession planning?⁠ ⚡ Do you require a salary or can you reinvest the profits?⁠ ⁠ It can be a little overwhelming when figuring it out. At the end of the day – speak to an accountant who will be able to sit down and understand your own individual circumstances. Ltd companies work in some scenarios and not in others so it\’s about checking in with your plans and finances to work out what is best for you. ⁠ ⁠ 👍 Double-tap and please subscribe to the channel!⁠ ⁠ PS – I also have a newsletter where I send out updates on property videos and my own projects that I\’m working on. Check it out on my website!⁠ ⁠ ⁠ #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 #bedroominspo
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How to start a property business 🔥⁠⁠🧮 New YT Vid – link in bio!⁠ ⁠ Continuing on from my beginners series to help brand new property folk looking to get started with no upsells and no BS – In this video, I run through 8 things to consider when starting your property business in the UK. ⁠ ⁠ It took a good year to create my property business plan, understand what strategies are best for me and eventually starting the property company structure which leads me to today where I\’m ready to make my first move and really get started and hit the ground running. ⁠ ⁠ You should be thinking about:⁠ ⁠ ⚡ What\’s your long term aim?⁠ ⚡ What strategies are best for you?⁠ ⚡ How much time do you have?⁠ ⚡ Are you building your knowledge?⁠ ⚡ Understanding your area⁠ ⚡ Speak to professionals (accountant, broker)⁠ ⚡ Understand your numbers⁠ ⚡ Get out there and do it!⁠ ⁠ It can be a little overwhelming when getting started. This video will help give you some focus on making your next steps⁠ ⁠ 👍 Double-tap and please subscribe to the channel!⁠ ⁠ ⁠ #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 #bedroominspo
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I\’ve explored 8 risk factors for next year 🔥⁠⁠🧮 New YT Vid – link in bio!⁠ ⁠ Will the market crash next year? Nobody knows. Every video, every podcast, every news headline – is all opinion. Expert or not. I\’ve just released a new YT video looking at the factors that COULD make some kind of impact.⁠ ⁠ The bottom line though – property is a long game so if you\’re strategy fits, keep calm and carry on. If you believe in the 18-year property cycle, we\’re meant to be in the mid-cycle dip right now. The reality is, we don\’t really know. There are too many uncertainties in unprecedented times. It could go up or down, but historically, property goes up over the long term. ⁠ ⁠ As business owners and property investors, we can monitor horizon risks, however:⁠ ⁠ ⚡ Understanding pent-up demand⁠ ⚡ When the stamp duty tax break ends⁠ ⚡ Brexit & market uncertainty⁠ ⚡ The end of the furlough scheme⁠ ⚡ Rising unemployment⁠ ⁠ These may have some effect next year⁠ ⁠ Have a look through the video – see what you think and let me know! Do you have any thoughts on next year?⁠ ⁠ ⁠ 👍 Double-tap and please subscribe to the channel!⁠ ⁠ ⁠ #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 #bedroominspo
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My first 30 days on YouTube 🔥⁠⁠📹⁠ ⁠ My original goal this year was to start a podcast but without a big audience, it can be very hard to gain velocity, and there\’s been an influx of new property podcasts recently, so I pivoted to a platform where fewer property people are. ⁠ ⁠ What I learnt & achieved from being on YouTube for 30 days⁠ ⁠ ⚡ I filmed, edited and uploaded 6 videos⁠ ⚡ I gained 15 subscribers⁠ ⚡ The videos were viewed almost 500 times in 1 month⁠ ⚡ The channel got over 16 hours of watch time⁠ ⚡ One video really popped (250+ views) which was about using Notion⁠ ⁠ The aim is to keep uploading valuable videos and enjoy the process of scriptwriting, filming and editing my property knowledge & combining my business skills, risk management & UK financial services & banking experience on probably the most vulnerable platform in front of a camera and see where it goes!⁠ ⁠ — The Pros–⁠ ➕ I\’ve had some people reach out who really resonated with some of the videos which was awesome. Mainly from newer investors who find my beginners journey very relatable. ⁠ ⁠ ➕ I\’m really happy with the engagement on the videos so far, I\’m pushing my editing skills on every video. ⁠ ⁠ — The Cons –⁠ ➕ It\’s hard work managing all the ideas, scripts and then filming & editing which from start to finish can take 6 to 8 hours for an 8-minute video.⁠ ⁠ ➕ It\’s hard not to get wrapped up in the YT analytics questioning why a video hasn\’t got views or checking to see how many likes you have. I need to do this less. ⁠ ⁠ ⁠ 👍 Double-tap and please subscribe to the channel!⁠ ⁠ ⁠ #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 #bedroominspo
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NEW YOUTUBE VIDEO LIVE! For those who are new to property, this video simplifies ROI & Yield 🔥⁠ ⁠ ⁠ Back to basics this week! I have a range of followers (thank you!) from experienced veterans but also people newer who have reached out to me so this one is for you!⁠ ⁠ This video for beginners explored in 6 minutes:⁠ ⁠ ⚡ How to simply calculate ROI + example⁠ ⚡ How to easily work out Yield + example⁠ ⚡ A framework of what costs to include⁠ ⚡ I also explore why everyone\’s definition of ROI is different. ⁠ ⁠ Full Guide: wtfpropertyinvesting.com/how-to-calculate-property-yield-roi⁠ ⁠ If you don\’t fancy watching the video – here are the calculations:⁠ ⁠ ➕ ROI = Annual Profit / Money Put In⁠ ➕ Yield = Annual Rental Income / Price of Poperty⁠ ⁠ You\’d shocked to know that many property investors (the ones who aren\’t engaged in the awesome Instagram community) will buy a property off the cusp without running the numbers. Sometimes there are hidden costs that are unexpected that blow your budget but you can show:⁠ ⁠ ➕ Business Sense⁠ ➕ Risk Management⁠ ➕ Financial Understanding⁠ ⁠ by running your numbers. This will ensure you don\’t put yourself at risk of going into negative equity on a refurb project. The key is understanding those numbers, buying at the right price and not overspending the budget you set in the refurb to achieve your correct ROI – with a bit of contingency baked in. ⁠ ⁠ 👍 Double-tap and let me know if you found this useful!⁠ ⁠ PS. I have a newsletter over on my website where I send out weekly thoughts and interesting books as well as share my own property journey as a beginner. Link in bio.⁠ ⁠ #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 #bedroominspo
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NEW YOUTUBE VIDEO LIVE! I analysed over 324 data points for the best HMO areas in the UK! 🔥⁠ ⁠ This powerful data explores:⁠ ⁠ ⚡ Room Rental Rates⁠ ⚡ House Prices VS Room Rates⁠ ⚡ Supply VS Demand⁠ ⁠ Full Guide: wtfpropertyinvesting.com/hmo⁠ ⁠ If you don\’t fancy watching the video – the winner is Warrington with 1.4 people looking for every room available meaning there\’s lower competition.⁠ ⁠ Northern cities did very well with the likes of Leeds, Sheffield, Manchester, Nottingham and Liverpool all showing strong possibilities (Beware of Article 4 though).⁠ ⁠ Southern cities, naturally have strong rents but not huge compared to the north, the gap is quite small. And London although has great rents, has low ROI & Yield due to high property prices.⁠ ⁠ Check out the video for the high-level findings of the data, let me know what you think!⁠ ⁠ 👍 Double-tap and please check out the YouTube video!⁠ ⁠ PS. I have a newsletter over on my website where I send out weekly thoughts and interesting books as well as share my own property journey as a beginner. Link in bio.⁠ ⁠ #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 #bedroominspo
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Something a little different today. SEO or otherwise known as search engine optimisation 🚀 & DOMINATING google. ⁠ ⁠ Although new to the property world, I work in a bank by day and also freelance as a graphic designer / SEO expert.⁠ ⁠ I have been doing this for about 10 years 🔥 ⁠I\’m already seeing some killer results from my website for big terms. Still lots of work to do though!⁠ ⁠ I knew as a part of getting started in property, I wanted to document the journey and build a solid brand to do that in the process, so I can share valuable and honest content as a way to give back to the Instagram community that taught me so much.⁠ ⁠ Separately, I also teach the skills needed to learn SEO over on skillshare.com with a video course that\’s about 1hr 50 minutes. It\’s relatively new but some good reviews coming through already. ⁠ ⁠ To give back to the more experienced developers on here – if you\’re struggling to get traffic via Google – I\’ve attached a completely FREE link to my SEO class if you click on the link in my bio you\’ll see a button to go to my skillshare.com class.⁠ ⁠ The link is a 2-week free trial on Skillshare (so just remember to cancel your skillshare membership once you\’re done), although there are tonnes of other creators on there who teach photography, project management and other stuff so might be useful for your business!⁠ ⁠ 👍 Double-tap and please check out the class for free! No strings.⁠ ⁠ PS. I have a newsletter over on my website where I send out weekly thoughts and interesting books as well as share my own property journey as a beginner. Link in bio.⁠ ⁠ #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 #bedroominspo
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NEW YT VID: Giant leaps begin with small steps. I see loads about \’goal setting\’ – nothing about habits 🤷‍♂️⁠ ⁠ Amongst all the property content I see online, there\’s loads on goal setting and everybody is talking about it. It\’s healthy to set goals and set your direction. This week I explore \’Atomic Habits\’ by James Clear and cover the top summary from the book. It\’s really fascinating! 🔥⁠ ⁠ This amazing book talks about how goal setting is merely determining the outcome/s you desire. Setting a goal doesn\’t guarantee you\’ll actually meet it…⁠ ⁠ Instead, we should be focusing on systems, processes and forming those habits that bring us closer to those goals we set. ⁠ ⁠ Please check it out! Link in bio⁠ ⁠ wtfpropertyinvesting.com/youtube⁠ ⁠ Even by focusing on tiny changes, over time, and with the compounding effect – you could see remarkable results. ⁠ ⁠ 👍 Double-tap and let me know if you focus only on \’goals\’ our \’outcomes\’ or if you also focus on your processes and habits to get there!⁠ ⁠ PS. I have a newsletter over on my website where I send out weekly thoughts and interesting books as well as share my own property journey as a beginner. Link in bio.⁠ ⁠ #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 #bedroominspo

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.

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