Buying property through a limited company: The complete guide to buying property through your business

23rd July 2019 / in Buy To Let, Mortgages / by Gordon Hunter, MD

Are you a contractor, freelancer or investor considering buying property through a limited company? An increasing trend in recent years has been the number of people who are looking into buying property through their business.

As with any major investment decision, of course there are pros and cons to purchasing property as a company, so we have compiled this handy guide to make sure you are well informed about the process and whether it’s right for you.

A number of years ago buying a property through your company was not deemed to make sense for many, as tax laws meant that it was more hassle than hat it was worth to you and your business.

There are several factors which come into play when considering such a decision, particularly for those classified as contractors.

Tax

One of the most important factors to take into consideration during this type of property purchase is the implications for your personal and business taxes.

Many people will opt to buy through their company as the level of corporation tax they will pay on the property will be less than the income tax associated with money made from the rental of the property.

When you buy and sell properties as a limited company you are subject to corporation tax, which is currently at 20%, while you could face as much as a 45% cut from income tax if you fall into the highest income bracket.

Stamp Duty

The other consideration which must be taken is related to stamp duty land tax, which differs depending on the value of the property, but individuals pay no tax on properties worth up to £125,000 and 2% on properties worth up to £250,000. This rises to 5% after that for individuals.

However, when buying a property through a limited company these rates will be higher. Stamp duty is charged at 3% of the property price for those classified as ‘second homes’ – with the majority of properties bought through businesses coming under this category.

Lenders

Despite the large amount of lenders which are willing to offer loans to cover personal homeowners, there are relatively few in comparison who will lend to limited companies.

These types of mortgages can often end up being expensive and subject to higher lending criteria, although that has begun to loosen as demand for buying properties through businesses grows.

Here at Super Contractors we can provide expert advice on what lenders offer these types of mortgages for your property purchase and guide you through the process – find out more about this and our other services here.

So should I buy a property through a limited company?

It really does depend on a number of factors, including the price of the property, what level of income tax you pay and what the purpose of the investment is. There is no perfect answer to the question – perhaps the most important consideration to take is how much you are currently earning and the tax implications surrounding that. Paying a lower rate of corporation tax compared to your income tax if you are a high earner would certainly make it an attractive option for many.

However, direct ownership may be the preferred method of buying a property to many. Making use of personal allowances under your own name may mean that it makes more financial sense than buying through a business.

Whatever the decision, it’s important to consider the implications and how they will affect your mortgage. For a free consultation on your property purchase, get in touch with Super Contractors now.

Your property may be repossessed if you do not keep up repayments on your mortgage.

This firm charges a fee of up to £395 for mortgage advice. This fee will depend on your circumstances and will be discussed and agreed with you at the earliest opportunity.

Lifetime Finance Group Limited trading as Super Contractors is an appointed representative of PRIMIS Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority.

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