Buying property through a limited company is a popular investment strategy, but it’s one that needs careful consideration. A limited company is a distinct entity, which means any acquisitions it makes aren’t treated as yours, even if you’re the sole director. That, in turn, changes everything from how mortgages work to how you pay tax. 

The most common scenario occurs when landlords look to secure properties via buy-to-let mortgages and need to decide whether it’s better to do so as an individual or as a company. Alternatively, you may find yourself wanting to acquire a commercial property to serve as your business premises. 

Knowing whether to buy through a limited company or not is about understanding the pros and cons. So in this guide, we’ll explore exactly that and help you decide whether you should buy property as an individual or through your business.

Let’s get started. 

How does buying property through a limited company work?

We’ll begin with a quick overview and then delve a little deeper into each step: 

1. Set up a limited company: If you’re setting up a limited company to buy property, you may need to speak to an accountant to decide if it’s worth structuring it as a Special Purchase Vehicle (SPV). 
2. Decide which type of property you want to purchase: Commercial and residential properties have different mortgage and tax considerations. 
3. Investigate the property: Research any potential property extensively to ensure it’s worth the asking price. 
4. Approach lenders: Securing a mortgage as a limited company can be trickier than for personal applicants. 

Whether you’re setting up a new company solely to purchase property or buying through an existing company, it is important to note that the business becomes the property’s legal owner. As such, the company is responsible for managing the property, paying related taxes and dealing with any other issues that may arise. 

Depending on what type of property you want to buy, you’ll need different types of mortgages that carry different interest rates and repayment terms. Buy-to-let mortgages, for example, are structured differently when compared to commercial mortgages. 

Once you’ve identified a property and determined what type of mortgage you need, you should research the property and potentially (in the case of a commercial mortgage) external factors like the local area, transport links etc. Mortgage providers will perform due diligence and investigate the property anyway, but it pays to be ahead of the curve so you can be sure a property is valued correctly and potentially negotiate a cheaper price.

You then need to contact a mortgage provider to see if they will lend to your company. The challenge with buying as a limited company comes from trying to find lenders that will offer good mortgage terms, as they will base their decisions against your business’ financial performance. Debt is held against your business rather than you as an individual, but some lenders may insist on offering personal assets such as your residential home as security. 

Before you approach any lenders, it’s worth chatting with an accountant to ensure your business is set up in the most beneficial way. A certain type of limited company known as Special Purchase Vehicles, or an SPV, may be useful depending on your circumstances. Crunch customers can use our Ask an Accountant service to learn more. 

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Advantages of buying property through a limited company

Tax efficiency

The main difference between buying a property individually or through a company comes in how you pay tax. If you’re planning to rent a property using a buy-to-let mortgage, your business will record the income and pay tax on profits under corporation tax rules. You’ll also only pay tax on profits you withdraw from the company – which allows for some useful tax-efficient investment opportunities (more on that further down). 

The most obvious benefit of paying corporation tax over personal tax is that the former tops out at 25%, whereas individuals can be taxed as much as 45% on personal earnings if they are eligible for the ‘top rate’. 

Because your company owns the property and is eligible to maintain it, you can also claim maintenance and repair expenses, which reduces your taxable profits and, subsequently, your corporation tax liability. 

Mortgage interest relief

Though we’ve just mentioned maintenance and repair work, you can claim an even more significant tax relief when you own property through a company. 

Mortgage interest is regarded as an allowable expense for limited companies, which means you can deduct the cost of any mortgage interest from your taxable profits. This reduces the amount of corporation tax you’ll have to pay and is usually most beneficial when you own multiple properties with a simple company. 

Limited liability protection

Buying property through a limited company comes with reduced liability. Because the company, not you, owns the property, you can’t be held liable for any debt the company falls into beyond your initial share capital investment (which is usually less than £100). 

Inheritance tax and estate planning

If you intend to pass property on to your family or loved ones, owning via a limited company may be the most advantageous way to do so. Property owned through a limited company is eligible for business relief, which can be used to reduce overall inheritance tax liability. 

Disadvantages and challenges

Increased administrative responsibilities

If you’re a buy-to-let landlord considering buying through a limited company, you’ll need to deal with all of the added responsibilities of running a limited company. Read our guide to setting up a limited company to learn more. 

Even if you’re a long-time business owner, buying property through your company carries additional administrative burdens. You need to make sure you’re always paying any applicable taxes and fees, or you could end up in trouble with HMRC. 

In the case of both buy-to-let and other property purchases, you’ll also have to produce additional documentation such as a business plan to help convince lenders to offer you the money you need.  

Limited mortgage options

The mortgages offered to private companies are more selective and expensive. Mortgage providers have to make different decisions when they lend to businesses – often basing the value of the loan on the potential income of a property rather than on its fixed value. 

Not only does this mean borrowers face more scrutiny, but it also means your options are more limited. Lenders will expect you to put forward a bigger deposit and will often charge higher rates and fees compared to residential mortgages. 

Mortgage lenders see lending to a business as higher risk, and for good reason. If your business fails to keep up repayments, the mortgage provider can’t come after you to recover debt, thanks to limited liability. To mitigate this, you may have to agree to offer personal assets as security. 

No Capital Gains Tax allowance

If you’re selling your property and want to use Capital Gains Tax (CGT) allowance, you can only do so as an individual. The allowance doesn’t apply to limited companies, as they don’t pay CGT and instead have to pay corporation tax against the profit from disposal. 

Stamp duty surcharge

Limited companies pay more than private buyers for Stamp Duty Land Tax (SDLT), often referred to as Stamp Duty. 

This is due to a 5% additional surcharge applied whenever a limited company purchases residential property over £40,000. This means buy-to-let landlords who purchase through a limited company must always plan for higher rates. 

Following changes in October 2024’s budget, these rates break down as follows:

Buying commercial property instead? You don’t need to worry about the 5% surcharge as it doesn’t apply to any non-residential properties. You can also learn more about negotiating the best deal on a commercial property purchase in this guide. 

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Transferring personally owned property to a limited company

If you want to transfer ownership from yourself to your company or vice-versa, prepare for a whole lot of admin. You’ll need to sell it to the new owner, which means you’ll have to account for additional charges like stamp duty and legal fees. 

If you’re just starting out in property investment but know you’ll want to transfer ownership further down the line, speak to an accountant or legal professional early on to help build a plan for it.

Is a limited company buying property the right approach?

With all of these benefits and disadvantages covered, we can now explore whether buying a property as a limited company is right for you. 

Buying property through a limited company grants you additional legal protection and provides better tax efficiency – but only if you make a meaningful profit. If you’re a basic-rate taxpayer and you only want to own a single property, it may be easier to buy it directly.

If you already run a limited company and want to buy non-residential property, doing so through your business provides more tax advantages and keeps everything within the business. 

Ultimately, however, every case is different. What works for one company may not work for another – so you must speak to an accountant about your plans and ask for advice. 

Our team here at Crunch can help you make the most cost-effective choice and provide ongoing tax filing services to ensure your new property doesn’t fall afoul of HMRC. Give us a call on 0330 4040664 to learn more about our digital accounting packages. 

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