How to set up an SPV limited company for buy to let

20 July 2022

You’ve decided to invest in a buy to let, a great way of generating a passive income. But you have heard the best way to own a buy to let is through a limited company.

So what is an SPV limited company and why do you need one? An SPV or Special Purpose Vehicle allows you to set up a company on companies house to hold and rent out property.

 

But why do I need a company to do that?

Well, you don’t, however, because of changes to the way landlords are taxed on rental income in 2017, owning property through a limited company can be a more tax-efficient option.

Prior to the law changing a landlord could claim mortgage interest payments as an expense to reduce their tax bills. Now the most efficient way to pay tax on rental properties is through a business. Corporation tax stands at 19% so even better news if you are a higher or additional rate taxpayer.

However, it’s always wise to consult your accountant on the most tax-efficient way to own your buy to let before you do anything.

 

I already have a trading business can I just use that?

Again, yes and no. You can but the lending options to trading businesses are restricted and the terms perhaps less favourable.

 

OK, how do I set up an SPV limited company? 

It’s quite easy to register your new company at companies house

https://www.gov.uk/limited-company-formation/register-your-company

Firstly, you’ll need:

  • a company name
  • registered address
  • names of the directors.

You’ll also need one of the following codes:

  • 68100 – BUYING AND SELLING OF OWN REAL ESTATE
  • 68209 – OTHER LETTING AND OPERATING OF OWN OR LEASED REAL ESTATE
  • 68320 – MANAGEMENT OF REAL ESTATE
  • 68201 – RENTING AND OPERATING OF HOUSING ASSOCIATION REAL ESTATE

 

How to apply for an SPV limited company buy to let mortgage.

Peritus Private Finance is a whole of market broker and as such has access to all the lenders available in this area. We can help you place your loan with the most suitable lender should you be a first-time landlord or an experienced landlord with an extensive property portfolio.

 

I already have a property portfolio. Should I transfer it to an SPV limited company?

This can be a tricky one. And it’s best to speak to your accountant to ascertain whether the overall income tax saving will be worth the extra work in the long term. 

Another thing to consider is that you’ll have to apply for new mortgages for all the property in the company name. You can’t simply add the property to your business as the mortgage will be held in your personal name.

 

How do I prove income to the lender from my new SPV limited company, I have no accounts?

The SPV is just acting as a tax-efficient wrapper. As a director or shareholder, the mortgage is still underwritten by you personally.

 

Will the company need a bank account?

Yes. You’ll need to set up a business account to make mortgage payments.

  

As a limited company can I borrow more than I can as an individual?

As a limited company, you’ll pay tax in a different way, so lenders typically lend more to limited companies. An independent mortgage broker will help you determine how much you can borrow.

 

Can the company have more than one shareholder?

A lender can consider up to 4 shareholders. A shareholder with 25% or more in the company will have to be added to the application. 

 

Can British ex-pats purchase buy to let property in the UK using an SPV Limited company?

Yes. If this is your situation we have advisers that specialise in finding mortgages for ex-pats living and working abroad.

 

We hope this short guide has been helpful.

For more information or to move your plans forward contact us on 0203 745 5893 or fill in the form below and one of the team will call you.