Limited company buy-to-let
The 2017 PRA and tax changes reshaped the UK’s Buy-to-Let market, creating a lasting impact. These reforms aimed to professionalise the market, shifting it away from retirees using property for retirement income. Instead, the focus moved towards professional landlords investing strategically in property portfolios.
As a result, forming limited companies became a critical strategy for landlords seeking efficient portfolio management. Limited company buy-to-let arrangements gained popularity, offering financial and administrative benefits. This shift encouraged landlords to adopt a structured and scalable approach to property investment.
When we first entered the Buy-to-Let market, our efforts aligned with this growing professionalisation. We targeted professional landlords, particularly those using limited company structures, to streamline their Buy-to-Let transactions.
To achieve this, we prioritised simplifying the incorporation process for landlords. Making these transitions seamless was essential for supporting the evolving needs of professional landlords. Five years later, the Buy-to-Let market continues to reflect these transformative changes, but where does it stand now?
Read more: How lenders can make Limited company buy-to-lets simpler here.
The benefits of limited company incorporations
A Limited Company structure has become an increasingly popular option for landlords with larger property portfolios. This is particularly true for those investing in Limited Company buy-to-let (BTL) properties. Changes in BTL tax relief, which dropped from 45% to 20%, have made this structure more appealing to higher-rate taxpayers. Using a Limited Company allows landlords to pay less tax, improving their overall returns.
Moreover, profits retained within the company are not subject to income tax. This advantage means landlords can reinvest more funds and expand their portfolios faster. Over time, this approach can significantly enhance portfolio growth potential.
Another key benefit is the simplicity it offers in managing property ownership. Individuals can be added or removed as company shareholders without transferring equity or selling properties. This flexibility is beneficial compared to personal ownership arrangements, which lack this level of adaptability.
For landlords with smaller portfolios, the advantages of a Limited Company structure may not always outweigh the costs. The transition process involves expenses, such as legal fees and taxes, which can deter some individuals. Additionally, landlords with fewer properties may find the tax savings less impactful on their overall income.
However, landlords often lack an understanding of the system, preventing them from further exploring this option. Seeking professional advice is crucial when considering such a change. While lenders cannot provide legal or tax advice, consulting qualified experts can help landlords make informed decisions about the potential benefits of a Limited Company structure.
This approach may not suit everyone, but it offers undeniable advantages worth exploring for landlords with growth ambitions.
Buy-to-Let case study: four-way title split for newly converted flats here.
Making it simpler by how we approach it
Navigating the incorporation process can often be challenging for borrowers. Hidden charges or higher interest rates may result in unexpected financial burdens depending on the lender. However, our Buy-to-Let service takes a more borrower-friendly approach.
We focus on simplifying the process to ensure a seamless experience. For instance, we offer ILA (Independent Legal Advice) waivers, helping borrowers save money. Additionally, we support unlimited portfolio sizes with no exposure limits tied to our lending. Unlike many providers, we maintain the same rates for limited company Buy-to-Lets and individual Buy-to-Lets, offering consistency and fairness.
Our team’s expertise in transactions ensures smooth incorporations. We understand the intricacies involved and are fully equipped to handle them efficiently.
Flexible Lending Criteria
Our lending criteria are designed to be highly adaptable. We allow a variety of property types within portfolios, ensuring broader eligibility for borrowers. Furthermore, there are no maximum lending caps or exposure limits, making us an ideal choice for ambitious landlords.
Another unique aspect of our service is the inclusion of client interviews. This personalised approach enables us to assess individual needs more effectively and offer higher loan amounts where suitable. By tailoring our solutions, we ensure a positive experience for borrowers within the UK mortgage market.
Transitioning to a limited company structure doesn’t have to be stressful. Our dedicated team and borrower-focused approach ensure that your Buy-to-Let journey is both efficient and cost-effective.
The technology making it simpler
A lender can streamline the incorporation process with several small yet impactful improvements. These adjustments are particularly beneficial for Limited Company buy-to-let transactions.
For instance, case duplication in the portal allows brokers to avoid entering details for every property. This saves valuable time while ensuring accuracy. Borrowers also benefit, as submitting just one ID verification suffices for all cases.
Furthermore, Rightmove integration enables portfolio assessments to be completed in minutes. This speeds up decision-making and enhances efficiency. To make valuation payments faster, Stripe offers a reliable, online solution that processes payments in just minutes.
The Power of Open Banking
Open banking is another game-changing tool for brokers and borrowers. It eliminates much of the manual effort required for portfolio reviews.
Typically, mortgages for limited companies don’t appear on individual credit files. As a result, we would often need 36 months of statements for multiple properties. This provides a sample of their mortgage history. However, Open Banking drastically reduces this time-consuming process. It delivers detailed information within seconds, which might otherwise take weeks to prepare.
By leveraging these innovations, lenders can improve processes, reduce administrative burdens, and offer a smoother experience for brokers and borrowers alike.
The right deal for landlords
Whether they want to continue as individuals, incorporate into Limited Company Buy-to-Lets or are already set up as a limited company, buy-to-lets deals must be simpler for brokers and their clients.
The benefits of incorporation might not be worth it for everyone, but when a landlord decides it’s right for them, making that adoption smoother so they can have confidence in their choice is what every lender should focus on.
Get instant quotes for our Buy-to-Let range on our Buy-to-Let page here.
Credits: Sophie Mitchell-Charman, Sales Director
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