Buy To Let Portfolios
Buy to Lets can be on an individual basis as a singular purchase or by setting up a Limited Company and purchasing a portfolio via the Limited Company.
What you need to know
- Limited Company products are only available to Special Purpose Vehicles (SPVs), set up solely for the buying, selling and letting of their own residential property.
- Only SPVs with one or more of the following Standard Industrial Classification (SIC) codes are considered: 68100 Buying and selling own real estate, 68209 Other Letting and operating of owned or leasehold real estate, 68320 Management of real estate on a fee or contract basis
- Partnerships or LLPs aren’t accepted
- Companies must be registered in England, Wales or Scotland. SPVs are considered from day one of being set up.
- A floating charge over assets of the company isn't required
- SPVs that have associated commercial property/assets are not accepted.
- Personal guarantees are required from all beneficial owners in all cases.
Speak to someone today
If you would like to speak to someone directly today,
please give Jonathan a call.
Available Monday - Friday 9am to 6pm
Obtain your Permission
Securing a Buy to Let Mortgage is a process that requires guidance because you are purchasing a residential property on a semi commercial basis in order to rent the property out as self funding and make a profit. Therefore how you approach this either as an individual purchase or setting up a Limited Company it is a big decision to make.
As a result of your enquiry we will telephone you to assess what you are looking to achieve.
Agreement / Paperwork
Upon your agreement we will discuss your case with the best suited lender concerned, give you initial feedback regarding the figures concerned and with your agreement submit the enquiry to the company concerned.
We will oversee the whole process and ensure a smooth process start to finish. There are no hidden fees or charges, it is all very clear and transparent.
Once your business need is completed and set up then unless you require any of our other services we carry out 6 monthly reviews to keep in touch but you know where we are.
Be advised that we do not cold call, we do not mail shot, we do not pester people, we do not force people to make decisions they do not want to. Everyone who we see is as a result on an enquiry led by them, meaning that the potential client has made the decision to look at and in most cases transfer their Final Salary Scheme or Personal Pension, or SIPP into a new arrangement be this a new Personal Pension or Annuity or Flexi Access Drawdown arrangement. Whilst we are not order takers, the point of this declaration is that we do not force or push people into making such decisions. We still go through a lengthy advice process to check viability, attitude to risk, product and fund selection and point out all of the pitfalls and benefits either way. In some cases we do not agree and this is pointed out to clients. We do not transact insistent client business.
Residential Buy-to-let Mortgages are suitable for any individual that wishes to purchase one or more buy to let properties on an individual basis.
Limited Company Buy to Lets Mortgage are suitable for people that want to wrap up new buy to let purchases in a Limited Company.
- The maximum number of directors/shareholders is two and they must be the same people.
- All shareholders must be directors and own 100% shareholding in the limited company between them.
- Two directors in some cases are acceptable where only one is a shareholder, providing they hold 100% shareholding.
- Directors may only have one limited company financed to the lender.
- The Company must advise lenders of any proposed changes in the directors of the Company or shareholding. If a client fails to comply, this may lead to legal action against them.
- Directors must meet lenders standard lending criteria.
- The Company/Person with Significant Control (PSC) Director details need to be correctly disclosed to lenders. A lender is legally obliged to tell Companies House if there’s a discrepancy between beneficial owner details and the information on the people with significant control (PSC) Register. Company structures outside of this aren’t acceptable to lenders.
Some reasons you should use us
- Access to our initial advice and finding a suited lender for your requirements
- Only the best brokers and product providers used to handle your application
- No hidden extra costs, all fees and charges fully disclosed at the outset
- Flexibility of product and tailored to your needs
- Extensive Industry Experience
- We are totally Independent, Directly Authorised Advisers.
- We are friendly and talk plain English and no waffle.
- No pressure selling from us.
Advantages of a Limited Company But to Let
- Higher Tax Relief.
- No tax on dividends <£5,000 for individuals
- No income tax when reinvesting profits to secure further properties
- Personal funds can be drawn back out of the company.
- Potential Personal Tax Savings.
- Easier Change of Ownership.
- Personal Expenditure.
- Not In My Name but a personal guarantee may be needed.
- If you hold property in a limited company it may offer tax benefits to certain people such as Higher rate tax Payers. If you pay tax on rental income, if you own a buy to let in your name the rental income you receive is added to your personal income. Your overall income will then determine your personal income tax band with the HMRC. Rental income could push you up into High Rate Tax. Limited Company Rental Property are held in a Limited Company and are not taxed on the basis of personal income. They pay corporation tax which is 19% (2020-2021). There is no upper tier to this like income tax.
- Landlords can no longer automatically deduct finance costs, like mortgage interest, from rental income. ... You can still deduct these kinds of expenses from the income on limited company buy-to-lets as they're considered business expenses.7 Jun 2019
Disadvantages of a Limited Company But to Let
- No Capital Gains Tax (CGT) allowance when the company sells a property
- When a company sells a property there is no personal Capital Gains Tax, Whereas individuals selling a property would have £12,500 CGT allowance (2020/2021)
- Property Transfer Costs
- If you want to transfer existing properties into the company you will incur Stamp Duty Land Tax, Legal Costs, Higher Rates and potentially Capital Gains Tax.
- It is currently not advised to transfer properties you already own into a Limited Company.
- Administrative Tasks. Dealing with HMRC, Completing Annual Returns and Company Accounts. It is not a disadvantage but an increased burden of doing business and the extra cost of an accountant to help you meet ltd company requirements.
- Higher Mortgage Rates. Most mortgage lenders with a few exceptions charge higher interest rates and fees for Limited Companies than they do in personal names due to extra work involved. A cost benefit analysis should be completed to compare the increased mortgage costs compared to the potential tax savings.
- Reduced Lender Choice. There are many lenders happy to lend for Buy to Let in your personal names, many of those lenders currently do not offer Limited Company Buy to Let Mortgages.
- With the budget changes more are entering the market which leads to a diversified choice and criteria.
- Higher Legal Costs. Some conveyance companies often charge extra fee for Limited Companies due to the extra workload involved such as registering mortgages at Companies House and ensuring Money Laundering Regulations are met.
- Personal Guarantees. In the typical article on Business v Sole Trader - you are usually told that a Limited Company gives you personal liability from its creditors. This remains with Company Buy to Let with one big exception - your mortgage lender will want a "Personal Guarantee" which is you agreeing to be liable for the mortgage debt of the company.
- Privacy. Your personal tax documents are between you, your accountant and HMRC. A limited company has to publish its accounts, available online at Companies House showing your property portfolio company financial status to the public.
- Releasing Equity. Landlords have long enjoyed releasing equity from property on refinance - especially in areas of good capital appreciation. Especially useful for the new car, holiday or home extension. With limited company property you can still release equity but those funds are that of the company - to be re-invested - if you want those funds personally it will be classed as income and taxed appropriately.
- Once you purchase a property in a Limited Company, that Limited Company can be used again and again to expand your portfolio.
- What mortgage lenders are not fond off are Limited Company's that conduct other business actives. As such you may find mortgage lenders insisting that you purchase property in a Special Purpose Vehicle.
- A Special Purpose Vehicle in this context means a company's business activities are limited to buying and renting out property, they do not want you to do other activities such as starting to manufacture items to sell for example.
- When choosing to buy a Property in a Limited Company or Personal Names is not a simple decision to make. There are many advantages and disadvantages in each scenario and it is not focused only on Tax Planning.
You also need to know that:
- A Residential Buy-to-let Mortgage is a secured business loan.
- An arrangement fee, as well as security and valuation fees will apply.
- For interest only mortgages, the actual amount borrowed doesn't reduce during the life of the mortgage. You’ll need to repay the full capital amount at the end of the mortgage term.
- If you repay part, or all, of your fixed rate mortgage before the end of the agreed term then you may need to pay an early repayment fee. This could be substantial depending on the interest rate at the time. This fee does not apply to bank rate linked loans.
- A first legal charge over the property as security would be required. This means if you’re remortgaging an existing property, you must repay any loan secured on it before completion.