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Can you buy your house through your business?

Can you buy your house through your business?
Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 25, 2022

This is quite a tricky question and one that needs careful consideration, as there are a number of pros and cons to consider.

Can you live in a house bought by your limited company?

Yes, but it is not advisable.

If you buy a property through a limited company, then you could incur a Benefit in Kind (BIK), which, as an employee of the company could be considered by HMRC to be notional pay or fringe benefits. Which means they must be treated as taxable income. The current rate is between 20% and 45%.

To avoid being taxed for Benefit in Kind, you’d need to pay full commercial rent to your company.  And in this instance, we would strongly advise that you consult your accountant or taxation professional on that point.

You also need to remember that if you sell the property, any profits made from the sale would be subject to 19% corporation tax, while any gains from privately owned property are usually completely tax exempt.

For example, if you bought a property for £200,000 and sold it a few years later for £300,000, you could end up with a £19,000 corporation tax bill.

Can you buy an investment or buy to let through a limited company?

Absolutely. In fact, there has been a significant move toward buyers purchasing investment properties or buy to let through limited companies.

Buying a property through a limited company can have certain benefits. For starters, as a private individual you will pay 45% tax, while a limited company will pay 19%.

Also, private landlords are no longer able to deduct their mortgage costs from the rental income, which was used to reduce the burden of their tax bill.

What are the main drawbacks with buying through a limited company?

The first problem you’ll come across is finding a mortgage provider, as many lenders are reluctant to offer mortgages to limited companies. Even if they are prepared to consider an application, they may require that the directors of the company enter into a personal guarantee.

You’ll also find that interest rates are higher because of the implied higher risk. It’s advisable to set up a company before purchasing your property, a Special Purpose Vehicle (SPV) is the favoured choice.

The reason for setting up a limited company first, is that if you have to transfer or sell a property to your new company, you may incur capital gains tax if the property has increased in value and stamp duty would be payable.

As you can see, there is a lot to think about, which is why we would highly recommend that you talk with an expert to make sure you get the right advice and make the right choices for your circumstances.

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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