Buying An Investment Property Through Your Company

Buying an Investment Property

Have you ever considered investing in residential property through your business?

Residential investment property covers a broad range of properties, including House of Multiple Occupancy (HMO), property you intend to rent out to one family or person (Single Let) and a property you intend to renovate for a profit (Flip) and of course many more. So, your investment options would be quite broad.

Here are some of the reasons why you should consider buying an investment property through a separate Limited Company. If you’re considering doing this, be sure to seek advice from your accountant first.


Keep more of the profits you make renting

If you were to become a private landlord, then profits you make from renting out the property would count as part of your total earnings and therefore be taxed in the same way as other income, via Income Tax. This can, therefore, push you into the next tax bracket, leading to additional taxes.

However, by investing in property via a limited company you still get taxed to access the rental income – such as through income tax or tax applied to dividend payments – but a tax accountant will find legitimate ways you can minimise such taxes.

Some examples of this are company cars, pension contributions, staff vouchers, and income shifting, to name just a few.

If you’re building a portfolio, this tax-efficient approach will lead to even more significant savings. This is therefore one advantage of buying through a limited company compared to as a private landlord, where the property is in your own name.


Benefit from mortgage tax relief

Private landlords cannot deduct mortgage expenditure from the rental income they receive to lower tax bills. Instead, they get a tax credit, which applies to one fifth of the mortgage interest payments. This means if you sit within the additional or higher tax bands, you can’t reclaim a lot of the tax you’ve paid on your mortgage payments because the credit only refunds basic rate tax. This is why for many private landlords it makes more sense to have the investment property in a private limited company.

In fact, it may also be worth becoming a limited company if you plan to invest in just one or two buy to lets, as if you already pay a high level of tax on your earnings, then this would be more tax-efficient.

So, if you have limited company status and purchase property this way, then mortgage interest is considered a business expense. You can deduct the mortgage interest payment from your earnings before paying corporation tax.

Are you thinking of buying an investment property through your business? If so, make sure you ask for advice to ensure you’re buying property in the most tax-efficient manner.


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