Thank You for filling out this form, the process was a success.
Unfortunately, an error occured while trying to send this email. Please try again later.
17th November 2023
The Buy-to-Let (BTL) market has long been an attractive investment option for those looking to achieve long-term financial growth in the UK. Recent changes in tax legislation have made purchasing a BTL property through a Limited Company Special Purpose Vehicle (SPV) a popular choice among investors. Let's explore the ins and outs of this method, its benefits, and potential pitfalls.
A Special Purpose Vehicle (SPV) is a distinct legal entity set up for a specific business purpose. In the context of BTL, an SPV is a limited company formed specifically to hold property investments. Unlike trading companies, which might engage in various business activities, an SPV's sole activity is typically property investment or management.
There are plenty of reasons why using an SPV for BTL property investment is a sensible approach. Let's take a look at why you might want to consider this method:
One of the main reasons for the surge in SPVs for BTL properties is tax benefits. Changes in UK tax laws in recent years have eroded some advantages of owning BTL properties personally. Mortgage interest relief restrictions for individual landlords have made operating via an SPV financially more appealing.
In an SPV, corporate tax rates apply to rental profits, which are currently lower than higher personal income tax rates. Additionally, within a limited company structure, it's possible to deduct mortgage interest as a business expense fully, thereby reducing taxable profits.find me a mortgage
Operating through an SPV limits personal liability. In the event of financial problems or legal claims related to the property, only the assets of the company are at risk, protecting individual investors' personal assets.
Just like any other financial product, it's important that you assess the merits of an SPV before diving into it. So, let's discuss some of the things that you'll want to factor into your decision-making process before embarking on an SPV:
When transferring properties from personal ownership to a company, it's essential to be aware that this can trigger a Stamp Duty Land Tax charge, even if no money changes hands.
While there's an increasing number of mortgage products available for limited companies, the range may be narrower than for individual borrowers. Interest rates for company mortgages might also be slightly higher.
Operating through a company means additional administrative tasks, such as filing annual accounts and company tax returns. There may also be costs associated with setting up and maintaining the company.
Setting up an SPV is relatively straightforward, but it still helps to know how it all works. Generally speaking, setting up an SPV for BTL property follows these steps:
If you already own properties personally and wish to transfer them to your new SPV, it's possible but with considerations:
Finally, it's worth considering the potential challenges that could arise from using an SPV for BTL. Some of the main pitfalls to think about are:
Purchasing BTL property via a Limited Company SPV can offer significant benefits, particularly in the realm of tax efficiency. However, it's essential to be aware of potential pitfalls and seek professional advice to ensure you make informed decisions tailored to your individual circumstances. As with any investment, due diligence, research, and ongoing management are crucial to success.
If you have any questions about SPV for BTL, or would like assistance in choosing the right mortgage product for your circumstances, please get in touch with our team at WIS Mortgages today.
The Financial Conduct Authority does not regulate commercial buy to let business or tax advice
Q. What are the benefits of buying property via SPV?
A. There are a few notable benefits to this approach, namely tax savings and an easier transfer of assets.
Q. Can I live in the property owned by my SPV?
A. Unfortunately, as this setup uses a BTL model you won't be allowed to use it as your dwelling. This extends to your family members too - and breaching these conditions could result in action taken against you by the lender.
Q. Is an SPV different to a limited company?
A. A special purpose vehicle (SPV) is a type of limited company that can be used for a specific purpose. For property investment, it can be a useful way to purchase and profit from rental properties.
As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.Contact Us