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Category: limited company
More and more landlords have turned to investing in buy to let mortgages via a limited company, but why is this? We take a look at what is driving them down this investment route.
Property investment and tax
Over the tax years 2017-2018 – 2020-2021 the amount of mortgage interest tax relief a landlord could claim reduced, until it was removed completely and replaced by a flat 20% tax credit.
This reduced the profit landlords were making from their rental properties.
However, limited companies were still able to claim mortgage interest tax relief, and still are, at the time of writing.
This meant that for some landlords, investing through a limited company got around the loss of tax relief and helped to maintain their profits.
How do you know whether to invest via a limited company?
Given that a decision on whether or not to invest via a limited company comes down largely to tax, you will need tax advice.
There are different tax rules for limited companies than the rules that apply to individuals, mortgage interest tax relief is just one of them.
Other taxes that limited companies pay include:
- Corporation Tax
- Value Added Tax (VAT) – if the company has a turnover of £85,000 or more you must register, if your turnover is less than this registering is voluntary.
- Employers’ National Insurance contributions – this would apply to you as a director, even if you don’t employ staff.
Directors of limited companies also have personal tax to pay which is handled via HMRC’s Self-Assessment Tax Return.
To understand if or how these taxes would apply to a company you set up, you will need to speak to a professional tax advisor. Some people think that where a mortgage advisor can help you with a limited company mortgage, they can answer questions on tax, but a mortgage advisor isn’t qualified to do this.
Once you have decided, get help with a mortgage
Once you know which investment route you are going to take, get in touch with our experts who will find you a competitive mortgage deal tailored to your circumstances and requirements. If you want to compare personal name mortgage options with limited company mortgage options, an advisor can help you with this too.
You can talk to an advisor via live chat, call on our Freephone number above or submit an enquiry for a call-back.
