Limited Company Holiday Let Mortgages

Limited Company Holiday Let Mortgages

Purchasing a holiday let property through a limited company can be a smart way to grow your property investment portfolio and build a holiday letting business. By holding the property in a limited company structure, you can benefit from certain tax efficiencies and liabilities being ring-fenced from your personal assets.

However, there are some important considerations to make before taking this route and applying for a limited company holiday let mortgage.

Benefits of buying a holiday let through a Limited Company

Build a holiday letting business

Buying your holiday let through a limited company allows you to treat it as an investment property within a business structure. This separates it from your personal finances and gives you more flexibility to scale up your holiday letting enterprise by acquiring additional properties under the company.

Tax planning

There can be significant tax advantages to holding properties through a limited company, particularly when it comes to inheritance tax planning. For example, profits taken as dividends from the company may be taxed at lower rates compared to personal income tax on rental profits. 

As a limited company, you can also claim certain allowances and deductible expenses against your rental income that aren’t available to individual landlords. You can claim all of your mortgage interest as a deduction.  Company structures can allow more flexible tax planning opportunities because of this.

However, tax treatment depends on your specific circumstances, so be sure to always take professional advice from an accountant.

Separate assets and liabilities

Incorporating a limited company for your holiday let investments ensures a clear separation between personal and business assets, offering a layer of protection against business-related liabilities. This is because a limited company guarantees liabilities and debts within that entity, preventing creditors from pursuing your personal assets if things go wrong. This risk reduction can provide peace of mind when investing in property.

SPVs for property investment

Special Purpose Vehicles (SPVs) are commonly used in property investment to acquire and manage properties such as holiday lets. These entities offer a streamlined approach to property management and investment, providing an effective vehicle for property ownership and operational activities. When used correctly, SPVs can have various benefits for tax, financing, and liability reasons.

Considerations before using a limited company to buy a holiday let

Compliance and incorporation

Make sure your limited company is officially registered and incorporated through Companies House. Gov.uk provides a step-by-step process for setting up a limited company. 

You must then abide by their regulations, including filing documents such as annual accounts, corporation tax returns, and confirmation statements – your accountant can advise on your responsibilities.

Mortgage cost implications

Due to the perceived higher risk and the complexity of corporate mortgage applications, holiday let mortgages for limited companies tend to be more expensive than traditional mortgages. 

Lender requirements

Each mortgage lender will have their own specific requirements for lending to limited companies, which can vary significantly from personal mortgage requirements. Criteria may include minimum income levels, expected revenue, years of trading history, company ownership structure and more. Understanding these criteria is crucial to finding a suitable mortgage product, and a reputable mortgage broker will be able to determine whether you’re eligible for a limited company holiday let mortgage.