SPV companies are a great way to own UK buy to let properties due to:

• Reduced tax liabilities: An SPV enables you to offset 100% of your mortgage interest payments; plus your profits are taxed at only the 19% corporation tax rate (rather than potentially higher income tax rates).
• Retained earnings: Any rental profits can be held within the SPV company as retained earnings, which can then be withdrawn as income in later life.
• Less strict lender rental and portfolio stress testing criteria – borrow more with less deposit funds.
• Less strict lender requirements: Lenders’ rental cover stress testing criteria is typically more lenient for SPV mortgages – enabling you to borrow more with less deposit funds.
• Greater freedom for ‘portfolio landlords’: If you own four or more mortgaged properties in your own name, some SPV lenders will enable you to purchase further buy-to-lets via your SPV without requiring extra paperwork or triggering ‘portfolio landlord’ stress tests; so you’re always free to pursue your next property investment.
• Succession planning: By transferring shares in your SPV to your loved ones before you pass on at zero cost, you can avoid the stamp duty that would be applicable on the transfer of a personally-held buy-to-let portfolio.
• Easy portfolio sales: Want to sell your buy-to-let portfolio to another investor in the future? If your properties are held in an SPV limited company, you can simply sell 100% of your shares in the company to offload your entire portfolio at once.

Most property tax accountants we’ve spoken with over the years have confirmed if you’re a higher rate or additional rate taxpayer, the SPV limited company route is the way to go.

If you’re in the lower tax band and are looking to increase your disposable income via net rental profits from buy-to-let property investments, then it might be better owning them personally.

We’d recommend speaking with a property tax accountant to establish the pro’s and con’s of both given your specific circumstances, and your long term buy-to-let investment plans before making your decision.

Is there a difference between a personal buy-to-let mortgage and an SPV mortgage?

Essentially, both personal buy-to-let mortgages and SPV mortgages are loans secured against a property; in this case a buy-to-let property.

Mortgage interest payments are charged monthly, and you have the choice of fixing the payments over short and longer term periods.

The main difference is that with a personal buy-to-let mortgage, the mortgage is in your name, whereas for SPV investors, mortgage the mortgage is in the SPV company’s name.

Most SPV lenders require the directors and shareholders to sign personal guarantees to ensure the SPV mortgage is protected, but not every lender demands this.

Are limited company SPV mortgage deals more expensive?

Personal buy-to-let mortgages offered by the likes of The Mortgage Works, Santander, BM Solutions etc, have lower interest rates than SPV mortgages by lenders such as Precise, Kent Reliance, and Paragon.

So if the interest rates on SPV mortgages are higher than those on personal buy-to-let mortgages, does this mean the net returns from an SPV-owned buy-to-let – the amount of cash left following tax charges, mortgage interest payments, and expenses – are lower?

Not necessarily. If you’re a higher-rate or additional-rate taxpayer, the mortgage interest payment savings you’ll get from a personal buy-to-let mortgage could be completely wiped out by the higher tax costs on your rental income.

Unless you’re a lower-rate taxpayer, an SPV mortgage may still offer the better deal.

What’s interesting about the SPV mortgage space is that it’s still relatively young.  Big banks like Halifax (BM Solutions), Santander, Barclays, Virgin Money have not yet entered the space unlike Nationwide’s The Mortgage Works.

However with SPV mortgage lending making up around 40% of all buy-to-let mortgage transactions in the UK, it might not be too long till they do.

With the increase in competition and more choice, we may see SPV mortgage rates dropping in the future.

In summary – don’t be led astray by mortgage interest rates. Instead, focus on the net return (or the cash left in your bank account after tax) and the other benefits of SPV buy-to-let ownership (including succession planning, smaller deposit requirements and a future source of income).

Apart from any tax benefits an SPV limited company provides, are they any other benefits I should consider?

Succession planning – transfer your shares to your loved ones at the appropriate time.  Avoid stamp duty charges which would be applicable if you owned the buy-to-let properties in your personal name.

Portfolio sale – as your SPV will own your buy-to-let property assets, you have the option in the future of selling 100% of the shares in your SPV company to another investor.

Reduced tax liability – offset 100% of mortgage interest payments, and profits are taxed at corporation rates (19%).

Lower rental stress tests – borrow more on your SPV mortgage, with fewer deposit funds.

Portfolio stress testing ignored – SPV lenders can ignore your existing background buy-to-lets, ensuring you can always purchase your next buy-to-let investment.

If I want to transfer my existing buy-to-let or residential property to my SPV, how do I do it?

Let’s start with transferring your existing buy-to-let.

Firstly, it’s important to note that the transaction takes the form of both buyer (SPV) and seller (You).

Effectively your SPV limited company will be purchasing your buy-to-let property at market value as determined by the SPV lenders surveyor.

Stamp duty land tax (SDLT) plus the additional rate (3%) will be charged on the purchase, and capital gains tax (CGT) will be charged on the sale.

It’s worthwhile speaking with a property tax accountant who can break down the tax implications, and then the breakeven point – this is where the amount saved in income tax (rent being included into your personal earnings) overtakes the amount of tax charged (SDLT+CGT) on the sale and purchase.

For most if the breakeven point is up to 5-6 years, and they feel the buy-to-let property is worth retaining over the longer term (10 years+) it’s worth doing.

Now let’s discuss selling your residential property (the property you currently live in) to your SPV.

Firstly there shouldn’t be any CGT, so that’s good news.

There will be SDLT charges (same as above) which will be based on the property’s market value.

The good news is that now you don’t own a residential property, your next residential purchase will not be taxed at the higher rate.

You might find when crunching the numbers there’s no difference in the amount of SDLT charged, if you retain your existing residential property in your personal name, or sell it to your SPV.

Check out the current SDLT charges by clicking here

The SPV mortgage market is relatively still young, what do you see changing in the future?

At this specific time there are around 20+ lenders, and the great news is at SPV Mortgages we have access to market leading exclusives.

As our business not only focuses on SPV mortgages, but also residential and personal buy-to-let mortgages, we have our fingers on the pulse of what’s being discussed at the big banks.

The good news is that most are looking at the SPV space in a lot of detail, so we can only assume great things are coming to our niche sector of the market in the coming years.

And with increased competition, comes better pricing.  We’ve lost our crystal ball, but we feel confident the number of mortgage lenders offering SPV mortgages will increase over time as it has over the last four years.

Apart from standard rental buy-to-lets, are there SPV mortgage rates for HMO’s, MUFB’s and short term lets (holiday let mortgages & Airbnb mortgages)?

Yes.

There are SPV mortgage deals for standard properties, deals for HMO’s up to 20+ beds, and multi-unit freehold blocks up to 20+ self-contained units.

Non-standard construction types can be lent on, as well as conversions or newly refurbished properties.

Holiday homes, and properties let out on an Airbnb basis are fine.

In fact, with some SPV lenders they will allow you to stay in the property as well as let it!

What about SPV property stamp duty?

Whether you’re purchasing through an SPV or in your own name, there’s no difference in the amount of stamp duty you’ll pay on a new investment property.

Stamp duty land tax (SDLT) is charged at standard rates plus the usual 3% surcharge for buy-to-let properties (as well as second homes).

Find out how much stamp duty is payable on your next buy-to-let purchase with our free stamp duty calculator.

What about the legal side of an SPV company?

Most SPV mortgage lenders have what are known as closed legal panels.

This means you can work with one of the SPV lenders preferred legal partners – we’d recommend this route 100% of the time.

Or, you can work with your own conveyancer, but you will also be charged the legal work from the lenders!

Twice the cost, and twice the hassle in our experience.

Our advice – once you have agreed to move forwards with an SPV mortgage deal, select from the SPV lenders panel one of their preferred conveyancers.

What about SPV buy-to-let deposit funds?

Did you know deposit funds can be accepted as directors loans!

Directors loans are loans you provide to your SPV limited company, your SPV then owes you these funds in the future.

If the directors loan funds come by way of earnings then we can assume tax has already been paid, and therefore no additional taxes are levied on them when withdrawn from the SPV in the future!

Are you already a limited company owner?

If you are, you should be excited about this.

Retained profits in your trading limited company can be transferred by way of an intercompany loan, to your SPV with no tax liability.

The intercompany loan must have an interest rate chargeable on it based on current HMRC rules.

Check out this article for more info about the use of retained profits and how to build a SPV property portfolio

What about deposit funds?

Did you know deposit funds can be accepted as directors loans!

Directors loans are loans you provide to your SPV limited company, your SPV then owes you these funds in the future.

If the directors loan funds come by way of earnings then we can assume tax has already been paid, and therefore no additional taxes are levied on them when withdrawn from the SPV in the future!

Are you already a limited company owner?

If you are, you should be excited about this.

Retained profits in your trading limited company can be transferred by way of an intercompany loan, to your SPV with no tax liability.

The intercompany loan must have an interest rate chargeable on it based on current HMRC rules.

For more info about the use of retained profits and how to build a SPV property portfolio, check out our article here.

Bonus material

Stuck with finding a great SPV property investment, no problem we have your back:

Check out our Investment Property Sourcing Service:

• Focusing on areas which potentially will have great capital appreciation than the UK average over the next 5-10 years
• Buy-to-let property investments which meet the lenders minimum rental stress testing requirements resulting in 25% deposits only
• Sourced based on your specific property investment requirements – don’t worry we’ll explain what we look for when assessing buy-to-let property investments to give you a few ideas
• Our investment property specialists have over a decade of experience – if they wouldn’t buy it, neither should you

What criteria should I use when assessing if a buy-to-let property is worthy of investment?

For most property investors they’re looking for yield and capital appreciation.

In fact capital appreciation is more important than yield in our eyes.

Of course if you’re looking to increase your disposable income, then yield is more than likely the most important factor.

If it’s more about wealth creation, capital appreciation should be number one with yield in second place.

Aim to achieve both, and you won’t go wrong.

Property Investor Tool Kit:

• Stamp duty calculator
• Buy-to-let tax calculator
• Rental yield calculator
• Buy-to-let deposit calculator
• House price rise calculator

Click here, they’re all free to use.

Looking for property tax advice – no problem.

We can get you in touch with property tax specialists who have been carefully vetted by the team at SPV Mortgages.

They understand the latest HMRC property tax rules, but also lender policy.

We’ve found over the years that although most accountants understand property tax, they lack the knowledge to provide tax efficiency advice which is also acceptable to SPV mortgage lenders.

Trust us, you want both.