As a dedicated Mortgage Broker in Newcastle, we have experience in working with hundreds of Buy to Let landlords and helping them secure competitive Buy to Let mortgage deals. The customers we speak to who already have an existing property portfolio always ask whether it’s possible to transfer ownership from your own individual name(s), into the name of your own limited company.
First things first, it is important to know how a mortgage lender will approach purchases from a Limited Company. There are not a lot of lenders that will accept Ltd Company applications through anything else besides one through a SPV (Special Purpose Vehicle) Company.
When you register a company, your registration includes a SIC (Standard Industrial Classification) Code that sets out the business type(s) in which the company will be able to participate. Mortgage lenders don’t normally accept applications from general trading companies that can trade in other areas. An example of this, is if you have a plumbing and heating company, you would need to set up a new and separate company to your Buy to Let properties, rather than simply buying them through your pre-existing plumbing company.
The SIC codes typically accepted are 68100, 68201, 68209, 68320 but it can vary from lender to lender. To find out more information about SIC Codes, consult the Government website:
Purchasing a Buy to Let property under a limited company comes with both positives and negatives. For example, not every mortgage lender will consider applications from an SPV, as they would much rather lend to individuals/couples in their own personal name(s). With this in mind, individuals tend to have a larger choice of lender and product than SPVs.
Of those lenders that will lend to an SPV, you would likely receive higher rates than those offered to individuals. On a positive note, in recent years, changes to the way rental income is taxed has meant that the tax advantages generated by SPV ownership (relating to how income is taken and how that income is taxed) make up for any extra interest charges or lack of options to choose from.
As a trusted Buy to Let Mortgage Advisor in Newcastle, the first thing we’d always suggest customers do when considering whether to buy your property portfolio under the umbrella of an SPV is that you get advice from an experienced and specialist tax advisor. They will analyse how factors, such as your other income sources and the rate of personal income tax you pay will affect the overall status of your tax and establish whether individual or SPV ownership would be a better option for you or not.
As mentioned earlier on, the main factor in deciding whether to buy under an SPV is the position of your tax. This becomes further complicated when deciding whether to transfer properties that already exist in your own name, across into company ownership. The problem with this is that it is not a simple transfer, it’s a change of legal ownership.
The limited company is a separate corporate identity, so it works under the principle that your SPV is purchasing the property from you as an individual. This means you’ll have to account for stamp duty charges, legal costs and new mortgage valuation charges. You’ll also need to bear in mind that limited companies have running expenses and legal obligations. The good news is that these may be offset by the potential upside of some tax-deductible costs or long-term tax benefits.
Where Landlords are looking to increase their property portfolio, we find that they usually just continue to hold existing properties in their sole name(s) and purchase any new additions under the company name, in a bid to avoid all the on-costs of switching. With that said, no case is the same and there may be some instances where a switch like this would be beneficial in the long run, even when factoring in the costs of such a deal.
As you can tell, this is a specialist topic meaning that you need to be careful and know what you’re doing. If you are thinking of taking this route, you should know that our team of mortgage experts are on hand to help you with all of the arrangements, providing top quality Buy to Let Mortgage Advice in Newcastle, backed up by introductions to fully experienced accountants and solicitors whenever appropriate.