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The benefits of buying UK property through a limited company

As the UK property market bounces back from a tumultuous year due to the global Covid-19 pandemic, prospective buyers are likely looking for the best and most beneficial ways to buy and manage property, and an opportunity presents itself in the form of limited companies.

What is a limited company and how does it work?

A limited company is a type of incorporation that limits the amount of liability undertaken by the company's shareholders, and can be created to solely hold property. This model is appealing to investors because it ensures that the liability of company members is limited to their stake in the company, and there are certain benefits to owning property in a company name as opposed to a personal name.


Tax efficiencies

A limited company offers tax benefits when a property is purchased via the company because of two main reasons:

Firstly, the owners can offset 100% of their mortgage interest against the income generated (while those holding a property in their own name can offset just 20%). It also allows for profits to be drawn from the company easily via dividend income or owner loan repayments. Additionally for non-UK residents, there is 0% income tax applied to dividend income in the UK.

Lastly, owners will see lower capital gains tax on the sale of shares when exiting the limited company. Upon exiting ownership of the property the owners will have two beneficial options. If they sell their shares in the limited company, owners will pay a reduced capital gains tax and the incoming buyer does not need to pay Stamp Duty Land Tax. If the owner chooses to sell the property out of the limited company, there is no capital gains tax, but rather a flat rate corporate tax (which is currently 19%).

Limited personal liability

Since the company is a separate legal entity, there is limited personal liability on the shareholders and they have the ability to buy and sell to other investors with ease. If the company runs into trouble, their personal assets will be secure because a limited company is treated as a separate legal 'person' in its own right. Any debt, losses, or legal claims associated with the company are the responsibility of the company itself – not its owners, shareholders or directors.

Estate and inheritance planning

Limited companies also allow for better estate and inheritance planning. Today in the UK, inheritance tax is 40% of your estate value over and above £325,000, which includes any shares in a limited company. However, shares offer more flexibility and can be transferred or gifted quickly and easily, allowing for property owners to start planning for inheritance early. Property owners can manage their investment without entirely giving up control, allowing for an easier transition of ownership in the future.

While there are significant benefits to purchasing property through a limited company, there can be a few minor complications and challenges, such as there being a smaller number of lenders to choose from (though this is changing).

These complications are the perfect reason to contact Tailor My Property to find out more about our specialist services and incredible network of property and finance experts who can guide you through the whole process from beginning to end.


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