SPV and Ltd Company Buy to Let Mortgages
Since changes to mortgage interest tax relief came into force, buying investment properties through a Special Purpose Vehicle (SPV) limited company has become increasingly popular. Here is what you need to know.
What is an SPV?
A Special Purpose Vehicle is a limited company set up solely to hold property. It is separate from any trading business you may run. Lenders prefer SPVs over trading companies because the accounts are simpler and the risk is ring-fenced. The most common SIC codes accepted by lenders are 68100 (buying and selling own real estate) and 68209 (other letting and operating of own or leased real estate).
Tax Advantages
Within a limited company, mortgage interest remains fully deductible as a business expense. Corporation tax (currently 25% for profits over £250,000) is generally lower than higher-rate income tax. Profits can be retained within the company and reinvested, or extracted as dividends at a potentially lower tax rate. Always take independent tax advice before proceeding.
Mortgage Availability and Rates
Not all lenders offer SPV mortgages, and rates are typically slightly higher than personal BTL deals. However, the number of lenders in this space has grown significantly. A specialist broker with access to the whole market is essential to find the most competitive deal.
Director Personal Guarantees
Most SPV lenders require directors to provide a personal guarantee, meaning you remain personally liable if the company defaults. This is standard practice and should not put you off, but it is important to understand the commitment you are making.
Considering buying through a limited company? Our SPV mortgage specialists will guide you through the process and help you find the right lender.