One of the most common questions landlords ask us at the moment is whether they should be buying investment properties in their own name or through a limited company. It is a question that has become far more relevant since the phased removal of mortgage interest tax relief for individual landlords, and the answer is genuinely different depending on your circumstances.

This guide explains how the two routes work, what the main differences are, and what questions to ask before you decide. We are mortgage advisers rather than tax advisers, so we will always recommend you take independent tax advice before making a decision of this kind - but we can help you understand the mortgage side of the picture clearly.

What is an SPV limited company?

SPV stands for Special Purpose Vehicle. In the context of buy to let, it refers to a limited company set up specifically and solely for the purpose of holding investment property. Most buy to let lenders who offer limited company mortgages require the company to have a specific SIC code - typically 68100 (buying and selling of own real estate) or 68209 (other letting and operating of own or leased real estate) - to confirm the company exists purely for property investment purposes.

An SPV is different from trading through an existing limited company. Most lenders will not accept applications from trading companies or holding companies with mixed activities - they want a clean, dedicated property vehicle.

What changed for individual landlords?

Prior to 2017, individual landlords could deduct their full mortgage interest from rental income before calculating their tax liability. This relief was gradually phased out between 2017 and 2020 and replaced with a basic rate tax credit worth 20% of mortgage interest costs. For higher and additional rate taxpayers, this change significantly increased their effective tax bill on rental income.

Limited companies were not affected by this change. A company can still deduct mortgage interest as a business expense in full before calculating its taxable profit. This is the primary reason so many landlords have moved - or are considering moving - to a limited company structure.

What are the advantages of buying through a limited company?

The ability to offset mortgage interest in full is the headline advantage, but there are others worth knowing about.

Corporation tax on company profits is currently lower than higher rate income tax - though it is worth noting that corporation tax rates have risen in recent years and the gap has narrowed. Rental profits retained within the company are taxed at the corporation tax rate rather than your personal income tax rate, which can be beneficial if you do not need to draw the income out immediately.

Passing shares in a company to family members can be more straightforward than transferring property directly, which can have inheritance planning benefits - though again, specialist advice is essential here.

Limited company structures can also make it easier to grow a portfolio, as retained profits can be reinvested without first being subject to personal income tax.

What are the disadvantages of buying through a limited company?

The mortgage rate is typically higher. Most lenders charge a premium for limited company buy to let mortgages compared to personal name mortgages, and the number of lenders offering this product - while growing - is still smaller than the personal market. This means less competition and potentially fewer product options.

The application process can be more complex and may involve additional legal costs. Most lenders will require personal guarantees from the directors of the company, which means you remain personally liable even within a corporate structure.

Drawing money out of the company is a taxable event. If you want to use rental profits personally - for living expenses, for example - you will need to take a salary or dividend from the company, which creates its own tax implications. The tax efficiency of the limited company structure is most pronounced when profits are retained rather than extracted.

There are also accountancy costs to consider. Running a limited company requires annual accounts, corporation tax returns, and Companies House filings. These add ongoing costs that do not exist for individual landlords.

Should existing landlords transfer properties into a company?

This is a question we are asked regularly and it requires very careful consideration. Transferring a property you already own personally into a limited company is treated as a sale for both stamp duty and capital gains tax purposes - even if you are selling it to yourself. For most landlords with existing properties, the tax cost of transferring makes it uneconomical, and the limited company structure is more relevant for new purchases going forward.

There are some circumstances where incorporation may be viable - particularly for landlords with large portfolios and specialist structures - but this requires detailed advice from an accountant and tax specialist, not just a mortgage adviser.

Which mortgage lenders offer limited company buy to let?

The limited company buy to let market has grown significantly over the past few years as demand has increased. A range of specialist lenders and some high street names now offer products for SPV limited companies. Criteria vary between lenders in terms of minimum income requirements, acceptable company structures, maximum loan to value, and how they assess rental income coverage. Using a whole-of-market broker means you can access the full range of lenders rather than being limited to those you approach directly.

What should I do before deciding?

Talk to an accountant or tax specialist who has experience with property investment before making any decision about structure. The mortgage side is something we can help with - but the tax implications of buying personally versus through a company depend on your income level, existing portfolio, long-term plans, and personal circumstances, and they need professional tax advice to get right.

Once you have clarity on the tax position, come back to us and we will find the most suitable mortgage for whichever route you choose.

How Aspect Mortgages can help

The team at Aspect Mortgages are independent whole-of-market advisers with access to buy to let lenders across both the personal and limited company market. Whether you are an experienced landlord or buying your first investment property, we will help you find the right mortgage for your situation.

To talk through your options, call us on 01257 812345 or visit our buy to let page.