It is the first question most new landlords ask, and the answer depends on your tax position, how many properties you plan to own, and how long you intend to keep them. This is the outline; your accountant fills in the numbers.
Buying in your own name
Simpler, cheaper to set up, and the mortgage rates are usually a little lower. Rental income is taxed as personal income, and mortgage interest relief is restricted to a basic-rate credit. For one property and a basic-rate taxpayer, this often still comes out ahead.
Buying through a limited company
The company pays corporation tax on profit, and mortgage interest is a deductible cost. That is why higher-rate taxpayers and people building a portfolio tend to go this way. The trade-offs are higher rates, personal guarantees, annual accounts, and tax when you take the money out.
What lenders look for either way
Rental cover, which is the rent measured against the mortgage payment at a stressed rate; a deposit of usually 20% to 25%; and, for many lenders, a minimum personal income. Limited company lending is a specialist market, and several of the best lenders in it only work through brokers.
Moving existing properties into a company
This is a sale, with stamp duty and possibly capital gains tax, and every mortgage has to be redone. It can still make sense for a portfolio, but it needs a proper calculation first. We work through that with you and your accountant before anyone applies for anything.
