Limited company buy-to-let mortgages

What is a limited company buy-to-let mortgage?

A limited company buy-to-let mortgage is a loan made to your company, rather than to you personally, to buy a rental property. The company is named on the deeds and is the borrower, so the mortgage sits with the company.

That's the core difference from a personal buy-to-let mortgage. With personal lending, the lender assesses you: your income, your credit, your existing borrowing. With company lending, the lender assesses the company and the people behind it, the directors and shareholders. The property is owned by a separate legal entity, and the loan is structured around that.

Lenders treat the two differently for a reason. A company is a distinct borrower with its own accounts and its own ownership, so the assessment looks at the business as well as the individuals. That changes what you need to have in place before you apply.

Do you need an SPV?

In most cases, yes. Lenders that offer company buy-to-let mortgages strongly prefer to lend to a special purpose vehicle (SPV): a limited company set up only to hold and let property, with nothing else going on inside it.

The reason is simplicity. A lender wants to look at a company and understand exactly what it does and where its income comes from. A company that only owns property is straightforward to assess. A company that also trades, consults, or runs an unrelated business is harder to underwrite, and many lenders won't consider it.

This is where your SIC codes matter. Companies House requires every company to declare its business activities using Standard Industrial Classification (SIC) codes. Lenders expect to see property-specific codes, such as 68209 for letting and operating your own property, or 68100 for buying and selling property. The wrong code, or a code that suggests an unrelated trade, can cause problems when you apply. If you're not sure which to use, read what is a SIC code and what is an SPV.

Deposits and rates: what's different

Here's what to expect, rather than specific figures, because rates and criteria move and every lender is different.

Deposits for company buy-to-let tend to be larger than for an owner-occupier mortgage. Buy-to-let lending of any kind usually asks for a bigger deposit than a residential mortgage, and company lending sits at that end of the scale. Plan for a substantial deposit and treat anything smaller as the exception.

The spread of rates is wider too. Fewer lenders operate in the company buy-to-let space than in personal buy-to-let, so the range of products is narrower and pricing varies more from lender to lender. Some price company lending higher than personal lending; some balance that with stress testing that can work more favourably for companies. The point isn't a single headline rate, it's that company lending is its own market with its own pricing, and you compare within it rather than against personal deals.

How your deposit reaches the company also matters for tax and for the lender's checks. Money you put in is usually recorded as a director's loan to the company, which you can later repay to yourself without further tax. Funding a company purchase straight from your personal account, rather than through the company, can raise anti-money-laundering questions and slow a purchase down. The mechanics of this sit alongside the mortgage itself, and they're worth getting right early.

How lenders assess a limited company

When a lender looks at a company application, they look wider than they would for a personal one.

Personal guarantees from directors. Lending to a company almost always comes with a personal guarantee from each director. That means if the company can't meet its mortgage payments, the directors are personally responsible for them. The company structure doesn't put a wall between you and the debt in the way some people expect.

Accounts and records. Lenders take comfort from a well-run company. Up-to-date accounts, clean records, and a clear picture of income and expenses all help an application. A company that keeps accurate records and files on time presents as lower risk than one that doesn't. This is one of the quieter advantages of running your company properly from day one.

Shareholder make-up. Lenders look at who owns the company, not only who runs it. They want to know exactly who the shareholders are and that the ownership is clean and easy to understand. This is where structure starts to affect whether you can borrow at all, which is the next section.

Why your company structure affects whether you can borrow

This is the part landlords most often get wrong, and it's the part an accountant sees coming.

Lenders like simple, legible ownership. They want to look at your company and understand who owns it, who controls it, and who benefits from it, without untangling an unusual share structure. When that picture is hard to read, an application can stall or be declined, regardless of the property or your deposit.

A few structural choices cause real problems:

• Too few shares. Issuing only two or three shares looks logical for a couple or a small group, but it undermines credibility with lenders and limits your flexibility later. Standard practice is at least 100 shares at £1 each.

• The wrong people on the share register. Adding a non-earning spouse, young children, or grandparents as shareholders can affect mortgage eligibility. Lenders look at both directors and shareholders, and they scrutinise applications more closely where children are involved.

• Children under 18 holding too much. As a general rule, lenders may reject an application where more than 20% of the company's total shares are held by children under 18, even if those shares carry no voting rights. This 20% limit applies to the combined total across all under-18s, not per child. If you're bringing in several children or grandchildren, this is easy to trip over.

• Non-standard articles of association. Complex share structures (alphabet, growth, or freezer shares) and the model articles from Companies House can both cause issues. A lender wants a legally sound structure with the right paperwork behind it, and the off-the-shelf model articles often don't provide what's needed.

The hard part is that unwinding a structure to make it acceptable to lenders, after you've incorporated, can cost thousands and delay or lose a purchase. One investor formed a company with just three shares, one for each sibling, only to find lenders wouldn't take them seriously; they lost the property and paid to restructure. Getting the shares and articles right at the start is far easier than fixing them once the company is trading. There's more detail in share structure mistakes and articles of association.

The mortgage interest advantage of a company

There's a tax reason so many landlords borrow through a company, and it's worth understanding alongside the mortgageability point.

When you own property personally, mortgage interest is no longer a deductible expense. Instead, you get a tax credit worth 20% of the interest you pay, under the rules commonly called Section 24. For higher-rate taxpayers, that's a meaningful restriction, because the relief no longer matches the rate of tax they pay on the rental profit.

A limited company is treated differently. The company can offset its mortgage interest in full as a business expense, set against rental profit before tax is calculated. The more allowable expense the company has, the lower the profit it's taxed on. For landlords with mortgages, especially higher-rate taxpayers, this difference in how interest is treated is one of the main reasons company ownership adds up.

This is a tax point, not a borrowing point, and whether it works in your favour depends on your wider situation. For a fuller comparison of the tax on each route, read limited company vs private landlord tax.

Setting up to be mortgage-ready from day one

The thread running through all of this is structure. Whether you can borrow, how lenders see you, and how your interest is treated all come back to how your company is set up.

A company that's mortgage-ready from day one tends to have a few things in common: it's a property-only SPV with the right SIC codes, it has a sensible share structure (at least 100 shares, clean and legible ownership), it has articles of association that fit a property company rather than the generic model articles, and it keeps accurate, up-to-date records. None of that is about the mortgage itself. It's about being a company a lender is comfortable lending to.

That's the accountant's part of the picture, and it's the part that's hardest and most expensive to fix after the fact. Getting the structure right before you incorporate keeps your options open when you come to borrow.