Is it really better to buy a rental property through a limited company? It’s a question thousands of UK landlords are asking as tax changes and lender criteria make the decision more complex than ever.
The reality is that setting up a company for your buy-to-let portfolio can deliver real advantages, but it also comes with extra complexity. That’s why we’ve created this guide: to demystify limited company buy-to-let mortgages and give both new and experienced investors a clear view of the benefits, challenges, and practical steps involved in financing property through a corporate structure.
At AALTO Mortgages, we specialise in this increasingly common but complex area. With years of experience helping landlords navigate complex applications, we understand exactly what lenders are looking for and how to match the right structure with the right mortgage product.
Why Are Landlords Using a Limited Company Buy-to-let Mortgage? The Key Benefits
Tax Efficiency is the Driving Force
Let’s start with the big one: tax efficiency – a major reason many landlords turn to limited company buy-to-let mortgages to structure their investments. Changes to mortgage interest tax relief have reshaped the buy-to-let landscape, making company ownership a much more attractive option for higher-rate taxpayers.
When a property is owned through a company, finance costs such as mortgage interest are treated as a fully deductible business expense. This means they are deducted before Corporation Tax is applied, which can significantly reduce the taxable profit.
By contrast, individual landlords face much stricter rules, with mortgage interest relief restricted to a flat 20% tax credit. For basic-rate taxpayers, this may not be a major disadvantage, but for higher-rate (40%) and additional-rate (45%) taxpayers, it can have a big impact on net returns.
In many cases, paying Corporation Tax (currently 25% for profits over £250,000 and 19% for smaller profits) can work out more favourable than paying higher-rate personal income tax, particularly for those with larger portfolios.
Simplified Portfolio Management and Estate Planning
Another key benefit of holding property through a limited company is simplified portfolio management. By keeping rental income, expenses, and finance costs within a single entity, accounting and reinvestment become far more straightforward than juggling multiple properties under personal ownership.
There are also potential estate planning advantages. Shares in the company can be transferred to family members, giving flexibility for succession or inheritance. While specialist advice is always recommended, many landlords see using a limited company as part of a long-term wealth and retirement strategy.
A Note on Limited Liability
A limited company structure comes with the basis of limited liability. This means the company’s debts are separate from the personal finances of its shareholders, which in theory offers protection if the business runs into difficulties.
However, it’s important to understand how this works in practice with buy-to-let mortgages. Almost all BTL lenders require Personal Guarantees (PGs) from company directors and significant shareholders. This means that if the company defaults on its mortgage, the lender can pursue the individuals who signed the guarantees. In effect, this significantly reduces the limited liability benefit when borrowing through a company.
The Two Types of Company Lenders Consider: SPV vs. Trading Company
Understanding whether to apply for a limited company buy-to-let mortgage through a Special Purpose Vehicle (SPV) or Trading Company is key to a successful application – and it’s an area where many property investors get caught out.
The Specialist: Special Purpose Vehicle (SPV)
An SPV is a limited company set up solely to buy, sell and let assets . The company has no other business activities besides property investment, which makes it a simple and focused structure.
This clarity is exactly why SPV mortgages are the preferred and most common option for buy-to-let lenders — with fewer variables to assess, they can apply clear, straightforward lending criteria.
When forming an SPV, lenders will expect to see the correct Standard Industrial Classification (SIC) codes registered at Companies House. The most common property-related codes are:
- 68100 – Buying and selling of own real estate
- 68209 – Other letting and operating of own or leased real estate
- 68320 – Management of real estate on a fee or contract basis
Importantly, SPVs don’t need a long trading history. Many lenders are happy to accept newly incorporated SPVs, allowing landlords to set one up specifically for their property purchase and still access competitive mortgage products.
The Diversified Business: Trading Company
A Trading Company, by contrast, is an active business that also wishes to purchase and hold investment property within the same company. This other business could be in any other sector, from consultancy to retail to construction.
This is a more specialist area of lending, as the lender must assess both the property investment and the risks of the main business. As a result, fewer lenders are willing to work with Trading Companies.
That said, there are options. A smaller but established group of lenders are active in this market, including Aldermore, CHL Mortgages, Foundation Home Loans, Hampshire Trust Bank (HTB), MFS, Quantum Mortgages, and West One Loans.
You will however find that some mainstream lenders are more restrictive. For example, HSBC and Accord Mortgages explicitly do not accept applications from any type of limited company.
Lender Criteria: What Your Company (and You) Will Need to Qualify
Personal Guarantees (PGs): The Non-Negotiable Requirement
The most important point to understand is that all lenders require Personal Guarantees (PGs). This means every director, LLP member, and often any significant shareholder must sign a full PG; so if the company defaults on its mortgage, the individuals providing PGs are personally liable for the debt.
There is a mandatory requirement for Independent Legal Advice (ILA) for anyone providing a PG. This safeguard ensures that all those involved understand the legal and financial implications of providing a PG before the guarantee is finalised. It adds both cost and time to the process but is a crucial protection that every investor should budget for.
Director and Shareholder Thresholds
Lenders set rules around how many people can be involved in a limited company mortgage. Most lenders will work with a maximum of four directors or shareholders. Aldermore is more flexible, allowing up to six individuals, while Hampshire Trust Bank (HTB) places no limit at all. TMW, part of Nationwide, only allow 2 directors and/or 2 shareholders.
Equally important is the shareholder inclusion threshold. If a shareholder owns more than a certain percentage of the company, they must join the mortgage application and provide a PG. These thresholds vary, for example:
- CHL Mortgages and Keystone Property Finance: 20% or more
- Aldermore and LendInvest: 25% or more
Understanding these thresholds is vital for structuring your company correctly before making an application.
Are Limited Company Buy-to-Let Mortgages an Option for First-Time Landlords?
The short answer is yes, it is possible for first-time landlords to purchase property through a limited company. However, criteria are often stricter compared to experienced landlords.
A number of specialist lenders are open to first-time landlords, including Foundation Home Loans, Hampshire Trust Bank, Kent Reliance, Precise Mortgages, and Quantum Mortgages. It’s important to note that some lenders may apply specific conditions to first-time landlords.
For example:
- Aldermore requires first-time landlords to be at least 25 years old, earn a minimum income of £25,000, and have been an owner-occupier for at least 12 months.
- Buckinghamshire Building Society requires all directors and shareholders of an SPV to be owner-occupiers of another property.
These restrictions highlight the importance of working with a specialist broker who understands which lenders are most suitable for new investors using an SPV.
Deposits for Company Purchases
Deposit requirements for limited company buy-to-lets are relatively flexible. In addition to the director’s own savings, lenders will typically accept Director’s loans, inter-company loans (provided there is a shareholder overlap), retained profits within the company and gifted deposits to directors.
Lenders such as Aldermore, CHL Mortgages, and Foundation Home Loans are all open to these funding sources, giving landlords more options when structuring their investment.
Finding the Right Lender: Why a Specialist Broker is Essential
The buy-to-let market is highly fragmented. Some lenders specialise in the area of limited company buy-to-let mortgages and therefore offer competitive products tailored to company structures, while many mainstream lenders do not accept company applications at all. Knowing which is which is essential before you apply.
Specialist Lenders Who Embrace Company BTLs
There is a strong group of lenders who actively support limited company structures, including Aldermore, CHL Mortgages, Foundation Home Loans, Gatehouse Bank, Hampshire Trust Bank (HTB), Keystone Property Finance, Landbay, LendInvest, MFS, Paragon, Precise Mortgages, Quantum Mortgages, The Mortgage Lender, and West One Loans. These lenders understand the nuances of Special Purpose Vehicles (SPVs) and Trading Companies, and their criteria are designed with property investors in mind.
Lenders Who Don’t Offer Company BTLs
On the other hand, many high-street lenders do not cater to company applicants. Accord Mortgages, The Co-operative Bank, HSBC, and Santander will only accept personal applications, meaning limited company landlords cannot access their products.
There are also lenders that take a mixed approach. For instance, Barclays no longer accepts new company BTL applications directly. Instead, they service existing corporate clients and direct new business to their specialist subsidiary, Kensington.
Why a Specialist Mortgage Broker Makes the Difference
For investors, this patchwork of lender policies can make navigating the market complex and time-consuming. Applying to the wrong lender risks unnecessary delays and the potential of having an application outright declined.
This is where working with a specialist mortgage broker like AALTO Mortgages becomes essential. With in-depth knowledge of lender criteria, we can quickly identify the most suitable lender based on your company structure, experience level, and property type. This not only saves time but also ensures you access the right products from the start, giving your application the best chance of success.
