Why Buy Property in a Limited Company?

3 Mins
October 5, 2021

Buying property within a limited company is increasingly popular, with 77% of buy-to-let mortgage applications made through a limited company (H1 2019) due to more than just tax efficiency.

  • Tax Efficiency
  • Inheritance Tax Planning
  • Portfolio Expansion
  • Limit Personal Liability
  • Efficiently Buy & Sell

Tax Efficient Buy-to-Let Property Investment

Owning property within a limited company can provide excellent tax benefits and efficiencies, especially if you are a higher rate tax payer, or, if you are building a property portfolio.

Owning property as an individual means that the profit from the rental property is combined with your earnings and taxed as income. If you own a property within a limited company, the current rate of corporation tax is applied, which in most cases provides an immediate saving. As the Company Director, you have the flexibility to re-invest the profit into additional properties, put money into your pension, or, pay your Shareholders a dividend.

Tax Efficient Buy-to-Let Property Investment

Inheritance Tax Planning

If you hold your property within a limited company, it provides you with much greater flexibility with your inheritance tax planning, preserving your wealth that you are passing on to loved ones.

It is much easier to transfer shares in a limited company to your family than transferring ownership of a property that is owned privately because only the ownership, or, part ownership of the company is transferred and not the whole property. This could also protect from Stamp Duty Land Tax (SDLT) charges in transferring ownership, inheritance tax and capital gains tax liability.

You can gift value to another person, for example 10% every year and over time the inheritance tax liability on this reduces to 0% after 7 years.

With shares you can separate economics from control, so you can gift away the economics but retain control of the company.

Buy-to-Let Property Investment Inheritance Tax Planning

Expanding Your Investment Property Portfolio

If you plan to expand and build upon your property portfolio, the profit can be retained within your limited company to re-invest into your expansion, without being subjected to income tax.

Retaining earnings within your company helps to protect from tax liabilities, so you have the choice to repay mortgages and expedite the expansion of your property portfolio.

Limit Personal Liability

Company assets are held separately from your personal assets, so if there is an issue with a property investment, your personal assets are safer.

Company assets and liabilities held in a private limited company incorporated in England and Wales are separate to the shareholders'; therefore, if there is an issue, the shareholders' other assets are safer for example, the family home.

Efficiently Buy & Sell Property

Owning property within a limited company allows the company owner(s) to buy and sell shares without:

  • Stamp Duty Land Tax
  • Conveyancing lawyers
  • Complete a share transfer in a day rather than the 6-8 weeks it usually takes for property conveyancing

The typical structure with a specialist company managing your limited company, allows up to eight shareholders in any company.

Buy-to-Let Property Company Formation

Limited companies can be incorporated by a professional company for as little as £149, who can also provide services to manage your accounting and tax requirements.

Once the company is registered, you as the Director, will have the responsibility for keeping accurate records, annual returns, submission of accounts to HMRC and Companies House, etc. This is something that can be managed for you for a small monthly fee by an accountant who specialises in limited companies for property investment.

Speak with our team today to discuss UK property investment in a limited company.

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