Smart Investment Choice: BTL Mortgages for Limited Companies

By Jo Phillips

If you are searching for a smart investment opportunity, consider BTL mortgages for limited companies. A Buy-to-Let (BTL) mortgage is a mortgage taken out on a property that is purchased to rent it out. Recently, there has been a rise in limited companies purchasing properties to rent out rather than individuals. This is because BTL mortgages for limited companies offer several benefits compared to personal mortgages.

This article will discuss the benefits of BTL mortgages and why it is a smart investment choice for limited companies.

Tax Benefits

One of the main benefits of such mortgages for limited companies is the tax benefits. Limited companies must pay corporation tax on their profits, which is currently 19% in the UK. This is lower than the personal tax rate for higher earners. Using a limited company to purchase a rental property can reduce the income tax you pay on the rental income.

In addition, limited companies can claim tax relief on the interest paid on the BTL mortgage. This means the interest paid can be deducted from the rental income before calculating the tax owed. This can significantly reduce the tax liability.

Limited Liability

Another benefit of using a limited company to purchase a rental property is limited liability. As a director of such a company, your personal liability is limited to the amount of money you have invested in the company. This explains that your personal assets are protected if something goes wrong with the rental property. This is not true if you purchase a rental property in your name.

Easier to Manage

Using a limited company to purchase a rental property can also make it easier to manage finances. The rental income and expenses are kept separate from your personal income and expenses. This makes it easier to keep track of your finances and prepare your tax returns.

In addition, if you have multiple rental properties, you can set up a separate limited company for each property. This can make it easier to manage the properties separately and track their finances. This can be particularly useful if you want to expand your property portfolio and purchase additional rental properties.

Access to More Funding

Limited companies have access to more funding than individuals. This is because lenders see limited companies as a more secure investment. This means that you may be able to get a better interest rate and borrow more money than you would if you were purchasing the property in your personal name.

In addition, using a limited company to purchase a rental property can provide greater flexibility in terms of financing. Limited companies can access a wider range of financing options, such as commercial mortgages, which may not be available to personal landlords. This can provide more options for financing the purchase of a rental property and help reduce the overall cost of borrowing.

Potential for Growth

Finally, using a limited company to purchase a rental property can offer growth potential. According to Commercial Trust Limited, “Use their BTL mortgage calculator to compare prices.” As the rental income from multiple properties accumulates within the limited company, the potential for growth and financial stability can increase.

Such mortgages for limited companies are a smart investment choice. They offer tax benefits, limited liability, easier management, access to more funding, and growth potential. If you are considering purchasing a rental property, using a limited company can offer significant advantages over purchasing in your name. However, seeking professional advice before making any investment decisions is important.

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