Ltd Company

Buying your property through a Limited Company needs to be via a Special Purpose Vehicle Limited Company (SPV) –  which is solely for the purpose of property purchases/rentals.  You cannot use your existing Limited Company unless it is set up in this way.

If you already have a LTD Company and are wondering whether this would meet the SPV criteria, this is what the lenders like to see:

        • SIC code for letting property

        • No sign of any revenue through the company of anything other than letting property

SIC code - The Standard Industrial Classification of Economic Activities (SIC)  - used to classify business establishments by the type of economic activity in which they are engaged.

There are pros and cons with this type of purchase highlighted below:

Pros

• Income Tax can be lower as you would take income in the form of dividends which are taxed at a lower rate than personal income taxation.  This is mainly beneficial to higher rate tax payers.
• Profits can be retained within the company to further reduce tax liabilities in any given year.
• Shareholders can be added to the company to spread the tax liability.

Cons

• No personal annual Capital Gains Tax exemption is available.
• Requirements to comply with Company Law/Companies House, which adds extra costs and administration burdens.
• Fewer lenders in the market and generally higher interest rates.