When you are investing in property, such as a buy-to-let, there are two main ways of buying the property: you can either buy it personally or through a property investment company.
When you buy a property personally, the deeds are in your name, the mortgage is in your name and you personally pay income tax on any profits from your buy-to-let property.
If you buy through a property investment company, you own the property investment company. The company then buys the properties, the mortgages are in the company's name, and the company pays corporation tax on any profit from the buy-to-let properties.
Property investment companies are also known as SPVs or special purpose vehicles, and they're surprisingly common. In 2020 over 41,000 property investment companies were set up, with 49% of all buy-to-let mortgages issued to property investment companies in the first quarter of 2019.
A special purpose vehicle (SPV) is simply a regular limited company which is used solely for a particular purpose. In the case of property investment, it's used to purchase and rent out properties. If you have another business (perhaps contracting or consulting) it's recommended that you don't combine this with your rental properties - it can complicate getting a mortgage and increase the risk factoring. Lenders prefer properties to be held inside a separate SPV, set up for this purpose, with any other trade separate.
While this guide is mainly focused on property investment, it’s worth mentioning that there is a different type of limited company setup for property trading businesses, including rent-to-rent and property flipping. It can be difficult to get a mortgage for a trading business, so it’s important to ensure that your company is correctly set up for the types of property business activities you will be undertaking.