As an experienced Mortgage Broker in Hull, we have worked with hundreds of local Buy to Let landlords and helped them secure competitive Buy to Let mortgage deals. Our customers who already have a current property portfolio always ask whether it’s possible to transfer ownership from your own individual name(s), into the name of your limited company.
First of all, it is important to know how a mortgage lender will approach purchases from Limited Companies. There are not a lot of lenders that will accept Ltd Company applications through anything other than an SPV (Special Purpose Vehicle) Company.
An example of this is a company set up specifically for the purpose of investing in properties like this. When registering your company, your registration will include a SIC (Standard Industrial Classification) Code that First of all, you need to be aware of how mortgage lenders approach limited company purchases. There aren’t a lot of mortgage lenders that accept limited company applications through anything other than an SPV (Special Purpose Vehicle) Company, i.e. a company set up specifically for the purpose of investing in this type of property.
When you register a company, your registration includes a SIC (Standard Industrial Classification) Code that sets out the business type(s) in which the company will participate. Mortgage lenders don’t normally accept applications from general trading companies that can trade in other areas, so you have, for example, a plumbing and heating company, you would need to set up a separate company to your Buy to Let properties, rather than simply buying them through your plumbing company.
The SIC codes typically accepted are 68100, 68201, 68209, 68320 but it can vary from lender to lender. To find out more information about SIC Codes, consult the Government website:
Purchasing a Buy to Let property under a limited company comes with both advantages and disadvantages. For example, not every mortgage lender will consider applications from an SPV, preferring to limit their lending to individuals/couples in their own personal name(s). Therefore, individuals tend to have a wider choice of lender and product than SPVs. Of those lenders that will lend to an SPV, the mortgage rates offered would typically be higher than those offered to individuals. On the plus side, in recent years, changes to the way rental income is taxed has meant that, for many people, the tax advantages generated by SPV ownership (relating to how income is taken and how that income is taxed) make up for any extra interest charges or lack of choice.
As a Buy to Let Mortgage Advisor in Hull, the first thing we’d always recommend when considering whether to buy your property portfolio under the auspices of an SPV is that you get advice from a specialist tax advisor. They will assess how factors, such as your other income sources and the rate of personal income tax you pay will affect your overall tax status and establish whether individual or SPV ownership is better for you.
As we mentioned before, the main factor in deciding whether to buy under an SPV is your tax position. This is complicated further when deciding whether to transfer properties you already own as an individual into company ownership. There is a slight problem though, this sort of transaction is not a simple transfer; it’s a change of legal ownership.
The limited company is a separate corporate identity, so the transaction is essentially a purchase by the SPV from you selling as an individual, so you’ll have to account for stamp duty charges, legal costs and new mortgage valuation charges. Also, you will need to remember that limited companies have running expenses and legal obligations. However, these may be offset by the potential upside of some tax-deductible costs or long-term tax benefits.
Where Landlords are looking to increase their property portfolio, it often works out that they continue to hold existing properties in their sole name(s) but purchase any new additions under the company name, thus avoiding all the on-costs of switching. With that said, no case is the same and there may be some circumstances whereas switch would be beneficial in the long run, even considering the costs of switching.
As you can tell, this is a specialist topic meaning that you should know exactly what you are doing. So if you are thinking of taking this route, you should know that our team of mortgage experts are here to help you with all of the arrangements, providing top quality Buy to Let Mortgage Advice in Hull, backed up by introductions to appropriately experienced accountants and solicitors as required.