How it typically works
a £90,000 example
A client buying a 2-bed house for £90,000 sets up a limited company with themselves as shareholder and director, and may include their spouse and others. They lend the £90,000 to the company and the company buys the property.
One year in the company
The £5,103 can stay in the company to buy more property, or be taken out by the shareholder as loan repayment, now or later, with no further dividend tax. Once the loan is used up, perhaps after 18 years, the owner can take the rent out as dividend and pay dividend tax, by which time they may have retired and be a low-rate taxpayer. Illustration only: rent, costs and tax will vary and are not guaranteed.
AdvantagesSeven advantages
of buying with a company
Buying with a limited company can be a lot better, especially for UK taxpayers who wish to buy more than one house or borrow in the future.
Can be lower taxes
A company pays 19% tax on company net income below £50,000.
Personal income tax on rental profit can be higher, so depending on your situation your overall tax can be lower.
Take out your loan to the company
After paying the 19%, rather than taking the net rent out as a dividend, you can take it out as loan payback, for example over 15 to 20 years, with no further dividend tax.
Better inheritance tax planning
Shares can be easily gifted to children. The company can be amended to a Family Investment Company, with different classes of shares, to reduce inheritance tax. There are extra costs for more complicated set-ups.
Better if you intend to borrow
Under the "Section 24" rule there is much less tax on borrowing for property owned by a company than in personal ownership if you are a higher-rate taxpayer.
This is because, in the company, the interest can be fully claimed as an expense.
May not affect your personal situation
The company is a separate legal entity. For example, you do not pay the extra 5% stamp duty if you later buy a personal property. If you take no dividends, it does not affect your personal tax either.
Ideal for building a large portfolio
Leave your rent in the company, add to it and buy the next property, then repeat over 5 to 15 years.
With multiple houses you can also avoid the quarterly filings of "Making Tax Digital", which only apply to personal ownership.
Limited liability
Your liability is limited to the company, and you are not personally liable.
Personal or company
which is better for you?
Whether a company is better than personal ownership depends on your circumstances and plans. Best to discuss your situation at the Zoom video meeting and then decide.
Not suitable
for all
It may be better to buy personally or jointly if you are just buying one or two properties, or are not a UK taxpayer (UK income below £12,570 per person). Many overseas residents fall into this category.
Decide at your Zoom video meetingAlready own
property?
Buy your next property via us and get the free company formation service. Later, you can also transfer your other properties to the same company if needed.
Consider stamp duty and capital gains tax firstA standard company
set up free of charge
A standard limited company suitable for investment property ownership (SPV). This set-up is what most property investors, around 90%, go for.
Included free
- Up to 2 shareholders
- Up to 2 directors
- Standard Investment Property Company Articles (SPV) and SIC code 68209
- All documents, and help opening an online bank account
Optional services
- Preparation of company accounts at year end
- Submission of tax assessment to HMRC
- Companies House filings, including filing of accounts
- Personal tax returns if needed
Available at a competitive price. You are not obliged to use them: you can use another service or do it yourself.
When you buy any property from Find UK Property
From enquiry to rent
in three stages
We set up the company in parallel with helping you select a property, get ready for transfer and have the solicitors' ID video meeting. Your company becomes legal owner on the completion date, and the property is registered under the company name at the UK Land Registry.
1. Before you reserve
Complete the sales enquiry form and discuss with a sales consultant
Provide ID and get a draft agreement, under your personal name initially
Have a Zoom video meeting with a Director or senior staff to discuss your needs
2. Once you reserve
Make a reservation
We set up the company as per your wishes and get all documents
The agreement is amended to the company name
3. Completion
Property is selected and the solicitors' video meeting is done for ID verification
The property is transferred to the company at completion
Rent starts 1 month after completion
Questions
and answers
A consultant can explain how the free company formation service applies to your purchase and your plans.
1Do you provide company formation for clients who are not buying a property?
No. The company formation service is only available for clients who are buying a property. Existing owners can use the service if they are buying another property.
2Can I buy the first property under my personal name and still set up the free company for further purchases later?
Yes. Many of our clients do this, as they may save stamp duty on the first property and wish to have one property under personal ownership. We can set up the company free of charge for any future purchases, and the property can be transferred to the company later if needed.
3Do I have to use your optional services?
No. Year-end accounts, HMRC submissions, Companies House filings and personal tax returns are available at a competitive price, but you can use another service or do it yourself.
4Can more properties be bought with the same company?
Yes. More properties can be purchased using the same company.
Buy your property
through your own company
Complete the sales enquiry form and discuss your plans with a sales consultant. We will help you decide between personal and company ownership.
Book your consultationThis page is general information, not tax, legal or financial advice. Tax rates and rules change and depend on your circumstances, so take independent professional advice. The free company formation service is available to clients who purchase a property through Find UK Property, a trading name of International Property Specialists Limited.