How to Buy a House Through a Limited Company

At Towerstone, we provide specialist property accountancy services for homeowners, landlords, and property investors. We have written this article to explain the process and key considerations, helping you make informed decisions.

Buying a house through a limited company is something more people are considering, particularly landlords, investors, and business owners who are thinking long term. Rising personal tax rates, changes to mortgage interest relief, and the flexibility of company structures have all made this route more attractive. At the same time, it is not a simple alternative to buying in your own name and it comes with higher costs, stricter lending rules, and different tax consequences.

In this article, I will explain how buying a house through a limited company works in the UK, why people choose to do it, the step by step process involved, and the advantages and drawbacks you need to understand before going ahead. This is written from a practical UK perspective and reflects how lenders, solicitors, and tax authorities actually treat company purchases in real life.

What It Means to Buy a House Through a Limited Company

When you buy a house through a limited company, the company is the legal owner of the property, not you personally.

The property is registered at the Land Registry in the company’s name. Any rental income belongs to the company. Any mortgage is taken out by the company. Any tax on profits is paid by the company.

You may be a director and shareholder of the company, but legally the company is a separate person.

This separation is the key difference and it drives most of the pros and cons.

Why People Buy Property Through a Company

There are several common reasons people choose a company structure.

One of the biggest is tax. Companies pay corporation tax on profits, which is often lower than higher or additional rate income tax. Companies can also deduct mortgage interest in full when calculating profits, which individuals can no longer do.

Another reason is long term planning. Some investors want to build a portfolio that stays within a company and is reinvested rather than used for personal income straight away.

Others are thinking about succession planning or separating property activity from personal finances and risk.

However, these benefits only apply in the right circumstances. Buying through a company is not automatically better.

What Type of Property You Can Buy

A limited company can buy most types of residential property, including buy to let houses and flats.

It can also buy commercial property, mixed use property, or development sites, although the rules and lending options differ.

What companies generally cannot do easily is buy a property to live in personally. Buying your own home through a company is usually tax inefficient and can trigger benefit in kind charges, income tax, and additional complexity.

Company purchases are usually intended for investment, not personal occupation.

Step One: Setting Up the Limited Company

Before you can buy a house through a company, the company needs to exist.

This usually means incorporating a private limited company at Companies House. Many investors use a special purpose vehicle, often called an SPV, which is a company set up solely to hold property.

SPVs typically have standard SIC codes related to property letting, which lenders prefer. While you can use an existing trading company, lenders often view this as higher risk and may restrict options.

The company needs its own bank account and basic records in place before you proceed.

Step Two: Funding the Purchase

There are three main ways a company can fund a property purchase.

The first is using company cash. If the company already has funds, it can buy without borrowing, subject to usual legal checks.

The second is using a mortgage. Company buy to let mortgages are available, but they are more expensive and more restrictive than personal buy to let mortgages.

The third is a combination of director loans and mortgages. You may lend money to the company personally, which is recorded as a director’s loan and can usually be repaid to you later without further tax.

Understanding where the money comes from is important for both lenders and solicitors.

Company Mortgages Explained

Mortgages for limited companies are widely available, but they are different from personal mortgages.

Interest rates are usually higher. Arrangement fees are often larger. Loan to value ratios are often lower, commonly capped at around 75 percent.

Most lenders will require personal guarantees from directors. This means that even though the company is borrowing, you are personally on the hook if the company defaults.

Lenders also look closely at experience. First-time landlords can still get company mortgages, but options may be more limited.

Step Three: Making an Offer

Once the company is set up and funding is arranged, the company makes the offer on the property.

The offer is made in the company’s name. The memorandum of sale issued by the estate agent should clearly show the buyer as the limited company.

At this stage, sellers may ask questions about funding and timing, as company purchases are often associated with investment chains or more complex legal work.

Being clear and organised helps avoid delays.

Step Four: Conveyancing and Legal Process

Buying through a company involves conveyancing just like any other purchase, but with additional layers.

The solicitor will need company documents, director details, and proof of authority to buy. Anti-money laundering checks are often more detailed.

If there is a mortgage, the solicitor acts for both the company and the lender, just as in a personal purchase.

The legal work itself is not radically different, but fees are often higher due to the additional complexity.

Stamp Duty Land Tax for Companies

Stamp Duty Land Tax is one of the biggest cost differences when buying through a company.

Companies buying residential property almost always pay the higher rate of stamp duty. This means an extra 3 percent surcharge applies from the first pound.

There is also an additional 2 percent non-resident surcharge if the company is non-UK resident, although most UK SPVs are resident.

Unlike individuals, companies do not benefit from first-time buyer relief.

Stamp duty alone can add tens of thousands of pounds to the cost, which must be factored in from the outset.

Step Five: Completion and Ownership

On completion, the company becomes the legal owner of the property.

The purchase price is paid from the company’s funds or mortgage. The property is registered in the company’s name at the Land Registry.

From this point onwards, all income and expenses relating to the property belong to the company.

How Rental Income Is Taxed in a Company

Rental income received by the company is subject to corporation tax after allowable expenses.

Unlike individuals, companies can deduct mortgage interest in full. Other expenses such as repairs, management fees, and insurance are also deductible.

Corporation tax rates depend on profit levels, but are often lower than higher personal tax rates.

However, the story does not end there.

Taking Money Out of the Company

One of the most misunderstood areas is how you personally access the profits.

Money inside the company is not your money until you extract it.

You can take money out as salary, dividends, or repayment of a director’s loan.

Each method has different tax consequences. Dividends are taxed personally. Salary is subject to PAYE and National Insurance. Director loan repayments are usually tax free if structured correctly.

This means the effective tax rate is a combination of corporation tax and personal tax.

Capital Gains and Selling Property in a Company

If the company sells the property, any gain is subject to corporation tax, not capital gains tax.

Companies do not benefit from the personal annual capital gains allowance. There is no tax-free amount.

If you then extract the proceeds personally, further tax may apply depending on how the money is taken out.

This is a key difference from personal ownership and needs to be considered in exit planning.

Accounting and Ongoing Responsibilities

Owning property through a company comes with additional admin.

The company must file annual accounts, corporation tax returns, and confirmation statements. Rental activity must be properly recorded.

If VAT applies, which is rare for standard residential letting, additional obligations arise.

Professional accounting support is strongly recommended, particularly as the portfolio grows.

Pros of Buying Through a Limited Company

For the right investor, the advantages can be significant.

Full deduction of mortgage interest can improve cash flow. Corporation tax rates may be lower than personal tax rates. Profits can be retained and reinvested without immediate personal tax.

Companies can also make it easier to bring in partners or plan succession.

Cons and Risks to Understand

The downsides are just as important.

Higher stamp duty costs can outweigh tax savings for many years. Mortgage rates and fees are higher. Personal guarantees remove much of the perceived risk protection.

Taking money out of the company can be tax inefficient if not planned carefully. Selling property inside a company does not benefit from personal capital gains allowances.

For small portfolios or short-term ownership, a company can be more expensive overall.

Common Mistakes I See

One of the biggest mistakes is people buying through a company without understanding the full tax picture.

Another is assuming limited liability means no personal risk, ignoring personal guarantees.

Using the wrong company structure, mixing trading and property activity, or failing to plan exits are also common problems.

When Buying Through a Company Makes Sense

This approach often works best for higher rate taxpayers, long-term investors, and those planning to build and retain a portfolio.

It is less suitable for one-off purchases, short-term flips, or people who need rental income personally to live on.

The Role of HMRC and Compliance

All tax treatment ultimately follows rules set by HMRC and guidance published on GOV.UK.

Company property ownership is well established and legitimate, but it is closely regulated. Accurate records and correct reporting are essential.

Final Thoughts

Buying a house through a limited company is neither a loophole nor a mistake. It is a tool.

Used in the right circumstances, it can support long-term investment, tax efficiency, and growth. Used without understanding, it can be expensive and restrictive.

My advice is always to start with the end in mind. Consider how long you plan to hold the property, how you will access income, and how you will eventually exit. Speak to a mortgage adviser and a tax professional before committing.

A limited company can be a powerful structure, but only when it fits your goals rather than being chosen by default.

If you would like to explore related property guidance, you may find how to buy a house with no money and how to find out who owns a house useful. For broader property guidance, visit our property hub.