Buying Property Through a Limited Company
24/08/2022
(Last Updated: 08/12/2023)
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4 min read
When acquiring a property, you can either do it as a private buyer or through a limited company. The latter has recently become popular, and it certainly has its advantages for buy to let landlords.
However, before buying property through a limited company, you need to take into consideration a series of factors. It can be more cost-efficient, but this might not apply to all individuals.
Can you buy a property through a limited company?
You can make this purchase through your company and either use the property as a residential one or as buy-to-let which will provide you with rental income. Although this method of buying has its positives, personal circumstances can make it ineffective.
Before you decide on acquiring your property, you must get independent legal advice from a qualified party. We can help with this service, for both you and any additional directors.
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Is it better to buy a property through a limited company?
This depends on the purpose of your transaction. Are you buying as an investment or to live in? Securing a property through a limited company can sometimes be a better option. For example, the mortgage interest for limited companies can be claimed as a business expense.
In addition, if the property is bought as an investment for your children, you have the option of making them shareholders of the limited company. Any earnings resulted from the property would then be split accordingly and taxed as income. This is payable at lower rates than the inheritance tax they might otherwise be subjected to.
Before buying property through a limited company, your lender will request you get director's personal guarantee independent legal advice. This is done so that an impartial solicitor can explain the risks this process has for you.
Is it hard to get mortgage for limited company?
Unless you’re planning to use cash for your purchase, you're probably going to need a mortgage. Limited companies can get one, but in order to secure a loan, you will need a director’s personal guarantee, which can have its risks.
Whether you’re acquiring a property as a private buyer or as a limited company, you will still be liable for your mortgage.
It’s also important to know that limited companies usually have less options when it comes to getting a mortgage, so you will need to request professional advice.
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Is it more tax efficient to buy property with a limited company?
If you’re purchasing a residential property as a private buyer, with the purpose of renting it, any profits made as a result will be susceptible to income tax. In comparison, limited companies pay corporation tax, which stands at a rate of 19%.
As per your earnings, you will be classed into an income bracket, which directly influences the rates at which you pay tax. In the UK, those are either 20%, 40% or 45%.
Depending on the bracket you fall into, it might make more sense to buy a property through a limited company. However, if you're already paying tax at a higher rate, it will not make a big difference whichever way you choose to make the purchase in.
Each case has specific circumstances, so we encourage you to get financial advice from an expert. SAM Conveyancing does not offer tax advice.
Can I transfer ownership of my house to limited company?
You can transfer the property over to your limited company. However, that may incur additional costs. If the transaction surpasses a certain price, you will be required to pay Stamp Duty Land Tax (SDLT).
Since your property will have increased in value since the initial purchase, you will also pay Capital Gains Tax. It would be more efficient to register the company before making the purchase.
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Written by:
Laura Cristian
Laura has a talent for data analysis and fact-finding. She is an advertising graduate with a broad range of skills in the web marketing field within conveyancing sector. She works closely with our panel of solicitors and surveyors to understand our clients' needs and challenges and to write the most valuable content for you.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
