Some professional properties investors use company for buy-to-let investment. We discuss below the rationale on why it might be good idea for your property investment.

Buy-to-Let through a company structure
If you are considering buying a property to rent out, you may be wondering whether it is better to buy it in your own name or through a limited company. Both options have pros and cons that you should carefully consider before making a decision.
In this article, we’ll talk you through the pros and cons of each option, as well as how you can go about getting a limited company buy-to-let mortgage.
What is a limited company?
When starting a business, you have the option of operating as a sole trader or incorporating your business as a limited company. A limited company is a legal entity that separates the responsibilities of the business owners (shareholders) and the business itself. In the UK, a limited company must be registered with Companies House. This business structure differs from that of a sole trader.
When a limited company is established, it becomes a separate legal entity. This means that the business can have its own debts and assets. If a limited company becomes indebted, the directors and shareholders are not held personally responsible and can only lose the amount they have invested in the company.
Purchasing buy-to-let property through a limited company is an appealing option to many people, as there are certain tax benefits, as well as the safety net of limited liability if things go wrong. But is this the best way to purchase a buy-to-let property, or should you purchase the property in your own name? Read on to find out.
Advantages of buying a buy-to-let property through a limited company
Purchasing a buy-to-let property through a limited company is an appealing option for many people. This is because it provides many benefits to landlords, from tax benefits to protection from liability if things go wrong. Let’s take a look at some of the advantages of purchasing your buy-to-let property through a limited company.
Tax benefits
As a private landlord with a property in your own name, you will be liable to pay income tax on your rental income. This is because the money you receive for rent is viewed as personal income by HMRC. If you have another job, this could mean that your rental income pushes your income into a higher tax band, leaving you liable to paying a higher rate of tax.
Purchasing your buy-to-let property as a limited company could enable you to pay less tax. This is because rental income from properties owned by a limited company is subject to corporation tax, rather than income tax. This rate currently stands at 19% for the 2021-22 tax year, and there are no higher tiers. This means that for many people, it is more tax efficient to purchase your buy-to-let property through a limited company.
Claim back your expenses
If you own your rental property privately, you may not be able to claim back certain expenses, such as your mortgage interest. This means that you may be taxed on the full rental income, rather than just your profits.
However, expenses work differently when you own your rental property through a limited company. This is because expenses such as mortgage interest are classed as business expenses for limited companies. For this reason, you may find that you are able to claim back more expenses when you own your rental properties through a limited company.
Protect your assets
Setting up a limited company can also help to protect your personal finances in case anything goes wrong with your new property investment. This is because limited companies provide limited liability for their directors.
For instance, if you have buy-to-let properties that are worth less than the mortgage you’ve taken out to fund them or if interest rates rise making it difficult for you to pay your mortgages, there is a chance that your lender will repossess the property. If this happens, you will lose money on the investment you’ve made, but your other assets will be protected against being taken by the bank, as long as they are held outside of any business investments.
However, it’s important to note that you will be held personally financially responsible for any personal guarantees that you provide for mortgages. If you’re unsure, it’s always best to check with an accountant or financial advisor.
Plan for the future
It’s always important to think about the future, to avoid making mistakes that you later come to regret. Investing in buy-to-let property is no different, which is why you need to think now about your future plans. This includes what you plan to do with your buy-to-let properties in later life.
If you plan to transfer ownership of your rental properties to family in the future, a limited company could make this process easier. That’s because it’s simpler and more tax efficient to transfer a limited company into new ownership than it is to pass on a property. This is because the property will remain in the ownership of the limited company, and it is only the directorship of that company that changes hands. This can potentially protect the transaction from being subject to Inheritance Tax, Stamp Duty and Capital Gains Tax.