Interested in buying property through a limited company? Luckily, the experienced team of sales and letting experts at Mistoria Estate Agents can help you decide whether this is a wise route to go down when it comes to purchasing a home. Below, we weigh up the benefits and disadvantages of buying a house through a limited company in detail to help you determine if it’s the best choice for you.
Can a company buy a residential property?
Yes, a company can purchase a residential property – most commonly using a sales and purchase agreement (SPA). However, it’s crucial you compare the benefits of doing this against the potential disadvantages before you commit to going down this purchase avenue.
When it comes to buying property as a limited company, suitability should be assessed on a case-by-case basis. It should examine your income, whether you already own property, and whether you own a limited company.
Can I live in a property owned by my limited company?
In some cases, buying property with a limited company will allow you to live in the property. However, this is dependent on how the limited company paid for it. By way of illustrating, if the limited company obtained a buy-to-let mortgage in order to purchase the property, it’s likely that the lender will not allow you to live in the property.
Similarly, most lenders will only grant mortgages for limited companies if they intend to use the property solely as an investment opportunity – for either buying, selling or letting property.
Do limited companies pay stamp duty on property?
Yes, limited companies are required to pay Stamp Duty on any property they purchase. This is because they are not eligible for the Stamp Duty Land Tax (SDLT) holiday and must therefore pay the additional three per cent charge that applies to second properties – even if this their first purchase.
Advantages of buying a property through a limited company
Higher rate taxpayers are required to pay up to 45 per cent income tax on profits. However, landlords who own a rental property through a limited company will only need to pay corporation tax on their profits instead – at the much lower rate of 19 per cent. Therefore, if you’re a higher rate taxpayer, you could stand to benefit from substantial tax savings.
Less personal liability
Purchasing a property through a limited company ensures it’s legally separate from your personal affairs. As a result, you will not be held personally accountable for any losses that the property accrues.
Potential inheritance tax benefits
If you choose to buy a house using a limited company, then you may be able to minimise the amount of inheritance tax your family members are required to pay. To do this, however, it’s important that they are made shareholders in your limited company.
Potential problems of buying property through a limited company
Lack of suitable lenders
The majority of buy-to-let lenders will not lend to limited companies and if they do, the company will need to meet a strict criterion. Often, the lender will also want the directors of the company to enter into a personal guarantee. This means that you, as the director of the limited company, will still take on liability for the property instead of the company itself.
Higher mortgage interest rates
Often, you are more likely to get a better mortgage deal if you apply using your personal name instead of purchasing the property as a limited company. As a result, you will typically pay higher interest rates when buying property through a limited company using a mortgage.
Registering your limited company
Ensuring your limited company is registered prior to purchasing a property is also vital if you want to avoid the inconvenient process of transferring property to a limited company. If you intend to transfer ownership of the property before creating a limited company, you should also consider the time and costs involved in setting up a limited company.
How to buy a property through a limited company
Wondering how to buy a house through your business in the UK? Enlist the experts! Arming yourself with all the facts and obtaining tailored property advice is always the best way forward. Between the tax implications and financial impacts, buying property as a limited company can be advantageous for one person and their circumstances, but non-consequential or even detrimental for another.
Sales support from Mistoria Estate Agents
For more expert advice and support when it comes to buying, selling, renovating and managing your properties, don’t hesitate to contact Mistoria Estate Agents today.