As a buy-to-let landlord, you may have heard about the benefits of owning rental properties through a limited company, also known as a Special Purpose Vehicle (SPV). It’s an increasingly popular approach among investors looking to optimise their tax positions, grow their portfolios, and simplify their property management structures. But what if you already own properties in your personal name? Can you remortgage them into a limited company?

The short answer is yes, you absolutely can remortgage an existing buy-to-let property to a limited company, but there are some important points to consider. At SPV Mortgages, we have put together this helpful guide to ensure you make the right choice for your buy-to-let property. Contact us now for more information. 

What Does Remortgaging to a Limited Company Mean?

Remortgaging to a limited company involves transferring ownership of a buy-to-let property currently held in your personal name to a company that you set up specifically for property investment. This company, often referred to as an SPV, acts as the legal owner of the property, holding it on your behalf.

The process typically involves selling the property to your limited company, with the limited company financing the purchase through a new mortgage specifically tailored for SPVs. This is not a simple transfer; it’s treated as a formal sale, which can have tax and legal implications.

Why Consider Remortgaging to a Limited Company?

1. Tax Efficiency

The most common reason landlords consider moving properties into a limited company is the potential tax benefits:

• Mortgage Interest Relief: Since April 2020, landlords owning properties in their personal names can no longer deduct mortgage interest from their taxable rental income. Limited companies, however, can deduct the full amount as a business expense.
• Corporation Tax Rates: Rental profits within a limited company are taxed at the corporation tax rate (currently 19% but may have raised to 25% for some businesses from April 2023), which is often lower than higher-rate personal income tax rates.

2. Simplified Portfolio Management

Holding properties under a single SPV can simplify record-keeping and allow for more straightforward management of income and expenses. This can be particularly beneficial for landlords with multiple properties.

3. Access to Retained Profits

Limited companies allow you to retain profits within the business, which can then be reinvested into further property purchases. This strategy is ideal for landlords focused on long-term growth.

5. Succession Planning

Transferring properties held within a limited company to heirs is generally simpler and may incur fewer tax liabilities compared to properties held personally.

6. Asset Protection

By holding properties within a company, you separate personal and business liabilities. This structure protects personal assets in the event of business debts or financial difficulties.

Costs to Consider When Remortgaging

When remortgaging a buy-to-let property into a limited company, it’s important to factor in all potential costs to ensure the financial viability of the move. While the long-term benefits can be significant, the upfront expenses may add up, making it essential to plan your budget carefully. Below are the primary costs you should consider:

Stamp Duty Land Tax (SDLT): One of the largest costs is Stamp Duty Land Tax, which is triggered when you transfer the property to your limited company. This includes the standard SDLT rate applicable to property transactions and the additional 3% surcharge for second homes and buy-to-let properties. 

Capital Gains Tax (CGT): If your property has appreciated in value since you purchased it, the transfer to a limited company will be treated as a sale for tax purposes, potentially incurring Capital Gains Tax. For long-term landlords with significant capital growth, this cost can be considerable.

Legal Fees: The transfer of property ownership and the setup of a Special Purpose Vehicle (SPV) involve legal complexities. Legal fees can vary depending on the complexity of the transaction, the property’s value, and the solicitor’s expertise, so obtaining quotes in advance is wise.

Broker Fees: Working with a mortgage broker who specialises in SPV buy-to-let mortgages can help you find the most competitive product tailored to your needs. However, brokers typically charge fees for their services, which can either be a flat fee or a percentage of the mortgage value. 

By carefully assessing and budgeting for these costs, you can determine whether remortgaging to a limited company aligns with your financial and investment goals. Proper planning and expert guidance are key to ensuring the transition is both manageable and beneficial in the long run.

Contact SPV Mortgages Now To Find Out More

Let us provide you with the clarity and confidence you need to take the next step in your property investment journey. Call us now or fill out our online inquiry form to schedule your free consultation. Take control of your property investments with expert support you can trust.