The ultimate guide to buying your 1st BTL property in a LTD company

 

With the regulations and tax laws around 2nd properties and property investing becoming stricter and stricter over years. More and more property investors are looking to invest through Special purchase vehicles (SPVs), which is the fancy term for a stand-alone limited company that holds Buy to Let properties. 

 

The main reason for investing through a limited company opposed to buying in your personal name is for tax purposes due to the change in regulations in the UK property market since 2016. The biggest change that occured in 2016 was the introduction of Section 24, where it was no longer possible to deduct the mortgage interest as a business expense on 2nd properties held within your personal name. So before setting out on any type of property investment we recommend speaking with an account 1st. What might be right for one person may not be right for the next. 

 

Before you do anything we always recommend speaking with your (or a recommended accountant if you don’t yet have one) to establish if buying through a LTD company is the correct route for you. Everybody’s tax situation is as unique as they are, and their investment strategy and long-term goals will differ from person to person. So, investing through a LTD company may not be the most tax efficient route for you to take. Speaking with an accountant to discuss your current situation and your plans will help determine whether a company is right for you. 

 

If investing via a LTD company is right for you then you will need to register your LTD company on companies house. If you have an accountant working for you already you can instruct them to do this for you to ensure it is done correctly. If you do it yourself the cost is minimal, but you must ensure it has one of the following SIC codes: 68100, 68201, 68209 or 68320. The SIC code indicates to HMRC and to lenders that the limited company is designated for the owning and letting of your own BTL properties. 

The company doesn’t need to be trading before you can buy property, because the company’s only activity is to hold property so until it owns a property it won’t have any trading activity and lenders know this. 

 

You will need a separate account for the rental income to come into and for your mortgage payments to be taken from separate to your own income and outgoings. This needs to be registered in the company name and the same address the company is registered to. 

 

Now that you have your company set up and a bank account ready to go its time to sit down with an adviser to discuss your strategy with them so that they can recommend mortgage products to help you on this journey. 

You will need to disclose to your adviser the company name, corporation number and registered parties to the company. Although the company will be the registered owner of the property the lenders will want the information of all directors when it comes to submitting a mortgage in principle and full mortgage application. 

You will need a mortgage in principle so that you can submit offers to estate agents, this is where you adviser comes in to secure this for you. You can make an offer without evidence of funds but its likely to be declined until you can provide the evidence they need. 

 

Now that you have a property registered in your ltd company you will now need to file company accounts each year and this will need to be done by your accountant. We recommend to instruct an accountant who is well experienced with property affairs to best support you through the various taxations. 

 

This is only a brief guide on how to begin investing in property via a ltd company. We are not authorised to give tax advice, and as such we always recommend speaking with a qualified accountant for this advice before making any investment. 

 

But if you would like more information on the mortgage side of investing via a ltd company please get in touch in the usual ways… 

 

01482 205084 

Info@greenandgreen.net