Limited company mortgages: are they right for you?
Recent changes regarding claimable income tax relief on buy-to-let mortgage interest, has left some landlords feeling an extra pinch. As a result, many who sit within the higher tax bracket are choosing to acquire their properties through an SPV Limited Company.
Special-Purpose Vehicle (SPV) Limited Companies are non-trading companies, as opposed to the traditional, trading, Limited Companies. An SPV indicates that you are setting the company up for a specific reason (in this case, for property investment).
Why is it so popular?
The main appeal of purchasing as an SPV Limited Company is the allure of more preferable tax rates. A Limited Company can be more tax efficient to those in the higher tax bracket as you pay Corporation Tax instead of Income Tax, meaning relief restrictions and reductions don’t apply. However, landlords paying basic rate tax could end up paying more with a Limited Company than if they’d stuck with a regular buy-to-let mortgage.
When you register a Limited Company you’ll receive a SIC code from Companies House - a Standard Industrial Classification (SIC) of your company’s economic activities.
At Molo we only lend to companies who carry one or both of the following SIC codes only:
Buying and selling of own real estate
Letting and operating of own or leased real estate (other than Housing Association real estate and conference and exhibition services)
For a more in depth look at SPV Limited Company mortgages check our blog ' Is it worth purchasing buy-to-let properties as a limited company? '.