Ltd Company Buy To Let. Buy a property as an individual or company? Expert tips!

Introduction

Gemma:

Today we’re going to be talking about purchasing a buy-to-let through an SPV, the pros and cons, and some comparisons between the two. This video is a follow-up from our previous buy-to-let video, so if you haven’t watched that one, make sure you check it out for more information on buy-to-lets specifically.

Hello and welcome back to our channel and podcast. My name is Gemma and here at WS we talk about all things relating to money, mortgages, and positive money mindset. If that interests you, be sure to subscribe to our channel and hit the thumbs up—it really helps with our YouTube algorithm.

On today’s podcast of Let’s Talk Money and Mortgages, we have Iftikhar with us. Ifty is a trained accountant and mortgage broker with over 10 years of experience, and one of the founding directors here at WIS.

What is an SPV?

Gemma: What is an SPV?

Ifthi:

SPV stands for Special Purpose Vehicle. It’s effectively a company set up for the special purpose of buying a property. Because of changes in tax legislation, many people now buy properties through companies. Banks usually require a special purpose vehicle for this.

Difference Between Buy-to-Let and SPV

Gemma: What is the difference between a buy-to-let and an SPV?

Ifthi:

Buy-to-Let: Usually for individuals or joint applicants. You are personally liable for the property.

SPV: A company route. You are only responsible for the capital and assets within the company, not personally liable.

Benefits of an SPV

Gemma: What are the benefits of an SPV?

Ifthi:

The main benefit is tax savings.

Under Section 24, higher and additional taxpayers cannot fully deduct mortgage interest anymore.

Example: If you earn £10,000 rent and pay £3,000 interest:

• Before Section 24: £7,000 profit → £2,800 tax at 40%.
• Now: £10,000 taxed → £4,000. You get a 20% credit (£600). Total tax = £3,400.

So, you pay £600 more tax as an individual.

With an SPV, you can deduct the interest, so it’s more tax-efficient for higher-rate taxpayers.

Interest Rates: Individual vs SPV

Gemma: Are interest rates similar between the two?

Ifthi:

No, SPV rates are about 1% higher. Reasons:

• You’re not personally liable, so risk is higher for the bank.
• Most SPV mortgages come from specialist or boutique banks with higher funding costs.

But don’t just look at the interest rate. Factor in tax savings. Often the SPV route still works out cheaper overall.

Setting Up an SPV

Gemma: How do you set one up?

Ifthi:

You can set up a company at Companies House for about £12–£13.

But don’t do it alone. Structures and SIC codes need to be right. Some banks dislike changes later.

Speak to an advisor before setting up, especially if you already have another business. Planning is key for long-term goals (retirement, succession, etc.).

Tax Savings with an SPV

Gemma: Can you save more tax with an SPV?

Ifthi:

Yes, especially if you’re a higher-rate taxpayer. Sometimes HMRC ends up taking more tax than your profit under the personal route!

For basic taxpayers, savings may not be as significant.

Downsides of an SPV

Gemma: What are the downsides?

Ifthi:

It’s a commercial mortgage, so:

• Takes longer to process.
• Rates are slightly higher.
• You’ll need an accountant for company accounts and corporation tax.
• More admin and costs compared to individual ownership.

Deposits for SPV vs Individual

Gemma: Is the deposit amount affected?

Ifthi:

Standard is 25% deposit for both.

Stress tests apply: banks check affordability if rates rise to 5.5% or if property is empty.

For higher-rate taxpayers on individual route → stricter stress tests.

SPV route usually allows you to borrow more.

Stamp Duty

Gemma: Do you still pay stamp duty?

Ifthi:

Yes. SPVs are treated as owning a second property, so you pay the 3% surcharge (4% in Scotland).

Owning Property Without a Residential Home

Gemma: Can you get a buy-to-let or SPV if you don’t own your own property?

Ifthi:

Almost impossible. Banks want you to be a homeowner first. They’re cautious about “back door residentials” (people buying a rental and living in it).

Is an SPV Worth It for Basic Taxpayers?

Gemma: If you are a basic taxpayer, is it worth setting up an SPV?

Ifthi:

Depends.

For young professionals (e.g., junior doctors likely to move into higher brackets) → yes.

For semi-retired with no portfolio plans → personal route may be better.

Using Existing Company to Buy

Gemma: Can you use your existing company?

Ifthi:

Generally no. Banks want SPVs separated from trading companies.

But you can:

• Transfer funds from a parent company to an SPV via director’s loans, commercial loans, or layered structures.

Multiple Properties Under One SPV

Gemma: Can you buy multiple properties under the same company?

Ifthi:

Yes, that’s the main benefit—saves accountancy costs.

But some banks dislike too many properties under one SPV. Structures may need adjustments.

Deposit Source

Gemma: Does the deposit have to be from your own savings?

Ifthi:

Generally yes, but:

• Gifts from close family are allowed.
• Joint ventures are possible.
• Funds from parent companies can be injected.

Employing Family Members

Gemma: Can I employ a family member in my company?

Ifthi:

Yes, but only if they do genuine work. HMRC doesn’t allow “something for nothing.” Admin tasks, accounts, or documented advisory work are fine.

Making Spouse a Shareholder

Gemma: Can I make my spouse a shareholder?

Ifthi:

Yes. Benefits:

• £2,000 tax-free dividend allowance.
• Helps with succession planning if one spouse passes away.

Legal precedent: Arctic Systems case allows salary/dividend allocation to spouses.

Living in an SPV Property

Gemma: Can you live in the property if it’s owned by a company?

Ifthi:

No. That’s a strict condition. Banks blacklist borrowers who try it.

Selling a Property in an SPV

Gemma: How do you get taxed if you sell the property?

Ifthi:

Corporation tax (currently 19%) on profits.

Example: Buy at £100k, sell at £200k → £100k profit → £19k tax.

Individuals may pay up to 28% CGT.

Exiting an SPV can be structured differently (dividends, capital distribution). Speak to an accountant.

Passing Property to Children

Gemma: What about succession planning with SPVs?

Ifthi:

SPVs work well. Parents gradually transfer shares to children (usually from age 18). Helps reduce inheritance tax liability (normally 40%).

But beware: transfers within 7 years of death may still be taxable.

Closing Remarks

Gemma:

Thank you, Ifty. Great advice as always. Reminder: these points may or may not apply to all borrowers. Speak to an advisor if unsure.

A mortgage is secured against your home and may be repossessed if you do not keep up repayments.