View
UK
Properties

Buying Property Through a Company: Everything You Need to Know

With a host of tax changes in recent years, more and more people are starting to buy property through their own limited companies. But why is this the case and how do you do it? Keep reading this detailed guide to ‘Buying Property Through a Company’ to find out.

Property Development Company

 

For many investors, buying property through a company has quickly become the new norm. 

With a host of ever-expanding tax changes post 2015, and the impact of Brexit and Covid-19 still being felt in 2021, the previously niche property investment strategy has shot up in popularity as one of the premier ways to tackle property investment. 

But what does buying property through a limited company mean, what are the benefits involved, and is it for you? In this guide, we will answer all these questions and more. 

If you’re looking at buying a second property to rent out as a buy to let investment, this detailed guide will help you evaluate the benefits involved with forming your own limited company, as well as buying and investing property through an investment company. 

If this sounds helpful to you, keep reading to learn more. 

Learn How to Choose the Best Investment Company With Our FREE Guide

Learn How to Choose the Best Investment Company With Our FREE Guide

Enter Your Details Below for Instant Access

Contents

Tax rates
View More

Tax rates 2020/2021



Buying property as a limited company pros and cons
View More

Buying property as a limited company pros and cons



Investing through a limited company pros and cons
View More

Investing through a limited company like RWinvest



How to invest in a company like RWinvest
View More

How to invest through a property investment company



What Does Buying Property Through a Company Mean?

Before we start this guide, it’s important to address the elephant in the room. What exactly do we mean by buying property through a company?

Well, buying property through a company has two common meanings.

The primary meaning you may be thinking of is setting up a property company for buy to let investment.

Alternatively, buying property through a company can also mean making a property purchase through the services of a property investment company.

If you’re buying property through a company in the latter sense, this means that instead of purchasing a property personally, you utilise the connections and resources of a property company such as RWinvest for your purchase.

In this guide to buying property through a company, we will explain how to invest in a company and discuss both options in detail to help you decide which route to take.

Taxes 2020/2021

As it stands, individual investors will usually have to deal with four main taxes in their property investment journey: income tax, capital gains tax, stamp duty land tax, and inheritance tax.

In the current tax year, those with an income between £12,500 and £50,000 will pay the basic tax rate of 20%. Higher earners above £50,000 will pay a 40% income tax, while those above £150,000 will pay a 45% rate.

The current personal allowance for income in a tax year is now £12,500.

Notably, you are taxed on your total income, not just what you earn from property.

So, if you earn £30,000 a year through property, and an additional £30,000 a year from a full-time job, you will fall into the higher taxation rates.

Capital gains is a tax that investors will only need to pay upon the sale of their property, with the profits made from a sale taxable.

Current rates in 2020/2021 are 18% for the basic rate, with the higher and additional rates paying a 28% tax on their gains.

Like income tax, you also have a tax allowance for capital gains, which is currently up to £12,300. Notably, if you jointly own the property, you can combine tax allowances with a partner up to a total of £24,600.

One of the most prominent taxes to change in the past year is the stamp duty land tax.

When buying property through a company, stamp duty is a tax paid on the purchase price of a property. Since July 2020, this tax has been changed to help promote continued property purchases during the economic uncertainty of Covid-19.

Until the end of June 2021, buy to let investors will pay a 3% charge on properties worth up to the value of £500,000. For properties worth between £500,001 to £925,000, you will pay an 8% charge.

These reduced rates have allowed investors to save up to £15,000 on property purchases, with further reduced rates set to be implemented between July and September 2021 before reverting to pre-pandemic levels.

Between July and September, you will pay a 3% charge on properties worth up to £250,000, with an 8% charge on properties between £250,001 and £925,000.

When buying property through a company, stamp duty can be one of the more difficult taxes to cover, as it needs to be paid within 14 days of completing your purchase.

If you want to learn more about stamp duty, be sure to check out our stamp duty calculator.

The final tax that investors will encounter depends heavily on their end goal.

If you are aiming to leave behind property as a legacy for your children, inheritance tax can be incredibly steep, with rates of 40% if the property value exceeds £325,000.

For couples who are married or in a civil partnership, this threshold is combined, so taxation will only affect property prices after £650,000.

While not a tax in itself, the changes to buy to let mortgage tax relief have been incredibly problematic for some investors.

Before April 2020, landlords and buy to let investors were able to deduct buy to let mortgage expenses from their rental income.

However, this is no longer the case. Instead, investors receive a tax credit based on 20% of their monthly mortgage interest payments.

This has reduced profits for many investors, with higher fees each month for their buy-to-let mortgages.

If you want to learn more about the taxes involved with buy to let, be sure to check out our in-depth guide.

Income Tax

In the current tax year, those with an income between £12,500 and £50,000 will pay the basic tax rate of 20%. Higher earners above £50,000 will pay a 40% income tax, while those above £150,000 will pay a 45% rate.

The current personal allowance for income in a tax year is now £12,500.

Notably, you are taxed on your total income, not just what you earn from property.

So, if you earn £30,000 a year through property, and an additional £30,000 a year from a full-time job, you will fall into the higher taxation rates.

Capital Gains

Capital gains is a tax that investors will only need to pay upon the sale of their property, with the profits made from a sale taxable.

Current rates in 2020/2021 are 18% for the basic rate, with the higher and additional rates paying a 28% tax on their gains.

Like income tax, you also have a tax allowance for capital gains, which is currently up to £12,300. Notably, if you jointly own the property, you can combine tax allowances with a partner up to a total of £24,600.

Stamp Duty Tax

One of the most prominent taxes to change in the past year is the stamp duty land tax.

When buying property through a company, stamp duty is a tax paid on the purchase price of a property. Since July 2020, this tax has been changed to help promote continued property purchases during the economic uncertainty of Covid-19.

Until the end of June 2021, buy to let investors will pay a 3% charge on properties worth up to the value of £500,000. For properties worth between £500,001 to £925,000, you will pay an 8% charge.

These reduced rates have allowed investors to save up to £15,000 on property purchases, with further reduced rates set to be implemented between July and September 2021 before reverting to pre-pandemic levels.

Between July and September, you will pay a 3% charge on properties worth up to £250,000, with an 8% charge on properties between £250,001 and £925,000.

When buying property through a company, stamp duty can be one of the more difficult taxes to cover, as it needs to be paid within 14 days of completing your purchase.

If you want to learn more about stamp duty, be sure to check out our stamp duty calculator.

Inheritance Tax

The final tax that investors will encounter depends heavily on their end goal.

If you are aiming to leave behind property as a legacy for your children, inheritance tax can be incredibly steep, with rates of 40% if the property value exceeds £325,000.

For couples who are married or in a civil partnership, this threshold is combined, so taxation will only affect property prices after £650,000.

Buy to Let Mortgage Tax Relief Changes 2020

While not a tax in itself, the changes to buy to let mortgage tax relief have been incredibly problematic for some investors.

Before April 2020, landlords and buy to let investors were able to deduct buy to let mortgage expenses from their rental income.

However, this is no longer the case. Instead, investors receive a tax credit based on 20% of their monthly mortgage interest payments.

This has reduced profits for many investors, with higher fees each month for their buy-to-let mortgages.

If you want to learn more about the taxes involved with buy to let, be sure to check out our in-depth guide.

Want to Buy Property Through an Investment Company? Invest with RWinvest Today

View Properties

Why Are Investors Buying a Buy to Let Property Through a Limited Company: The Pros

It's becoming more and more ideal for investors to use the services of property investment companies. This way, investors can get access to assured rental returns with incredibly competitive property prices.

Daniel Williams, RWinvest

Buying a Buy to Let Property Through a Limited Company: The Cons

Take Advantage of Unbeatable Deals in 2021 With RWinvest

View Properties

Buying Property Through a Limited Company: Things to Consider

Besides weighing up the pros and cons of investing through a company, there are certain goals and finances you need to think about to see if this method is suitable for you.

One of the first things you will need to consider is the amount of income you will expect to earn, including property and other sources.

If your income falls into the higher income tax brackets of 40-45%, it may be worthwhile opting to form a limited company to take advantage of the lower Corporation Tax rates.

As of April 2021, the latest data from HomeLet’s Rental Index, the average monthly rent is around £996. That means the average UK annual rental income on a single property is £11,952.

If you earn around £25,000 a year from a day-to-day job, including the rent from a single property, you will earn a total income of £36,952.

Therefore, this falls into the basic tax rate and may not be worth starting a limited company.

Another important aspect to consider is how you are going to use the rental income you generate.

If you are aiming to generate rental income for daily usage and fund a better life, you may not want to start a company as it will incur fees when trying to take money out of your business through dividends or salary.

Alternatively, if you’re looking to use the money you generate to buy even more properties, then a company might be a good idea as you can leave it in the business for future investments without incurring charges.

If you’re going to rely on mortgages to buy your properties, it’s well-worth considering forming a company.

This is because the ability to claim 100% of your mortgage interests against your rental income as an operating expense will save you plenty of cash.

The amount of cash you have access to is another thing to consider.

Many lenders may be hesitant to lend to a newly founded limited company, making it hard to find the best deals available.

If you have plenty of cash, you will be able to buy a property without this difficulty.

Another factor to consider is your goals, particularly your exit point.

Like every good investment, understanding how you are exiting your investment is vital.

If you’re looking to sell your property for a significant profit, you may be more comfortable staying as an individual investor to take advantage of your capital gains tax allowance.

Alternatively, if you are dreaming of passing on your property to your children or loved ones, a company can help save your family in Inheritance Tax.

Your goals can also include exactly how you are tackling your investment as a trader or investor.

To define the two, a trader is someone buying a property to add value to it and selling on for a profit. This practice is commonly referred to as house flipping.

For an investor, you will be buying the property to collect rent and then sell the house later down the line after growing in value.

As a trader, it will more likely be beneficial to start a company.

This is due to the fact that the profit you make when you quickly flip a house can be considered as a profit rather than capital gains, meaning you will likely be susceptible to higher income tax rates.

To make this profit count as capital gains, you will likely need to prove that you intended to rent the property first.

For investors, the answer is less straightforward, as there is a lot of give and take when it comes to forming a company.

While you will save money on taxes in some aspects, you will be paying for it in others.

Be sure to speak to a financial advisor to see which options make the most sense for you.

How Much Income Will You Earn?

One of the first things you will need to consider is the amount of income you will expect to earn, including property and other sources.

If your income falls into the higher income tax brackets of 40-45%, it may be worthwhile opting to form a limited company to take advantage of the lower Corporation Tax rates.

As of April 2021, the latest data from HomeLet’s Rental Index, the average monthly rent is around £996. That means the average UK annual rental income on a single property is £11,952.

If you earn around £25,000 a year from a day-to-day job, including the rent from a single property, you will earn a total income of £36,952.

Therefore, this falls into the basic tax rate and may not be worth starting a limited company.

Do You Need Rental Income to Live Off?

Another important aspect to consider is how you are going to use the rental income you generate.

If you are aiming to generate rental income for daily usage and fund a better life, you may not want to start a company as it will incur fees when trying to take money out of your business through dividends or salary.

Alternatively, if you’re looking to use the money you generate to buy even more properties, then a company might be a good idea as you can leave it in the business for future investments without incurring charges.

Do You Need to Use a Mortgage?

If you’re going to rely on mortgages to buy your properties, it’s well-worth considering forming a company.

This is because the ability to claim 100% of your mortgage interests against your rental income as an operating expense will save you plenty of cash.

How Much Money Do You Have?

The amount of cash you have access to is another thing to consider.

Many lenders may be hesitant to lend to a newly founded limited company, making it hard to find the best deals available.

If you have plenty of cash, you will be able to buy a property without this difficulty.

What Are Your Goals?

Another factor to consider is your goals, particularly your exit point.

Like every good investment, understanding how you are exiting your investment is vital.

If you’re looking to sell your property for a significant profit, you may be more comfortable staying as an individual investor to take advantage of your capital gains tax allowance.

Alternatively, if you are dreaming of passing on your property to your children or loved ones, a company can help save your family in Inheritance Tax.

Your goals can also include exactly how you are tackling your investment as a trader or investor.

To define the two, a trader is someone buying a property to add value to it and selling on for a profit. This practice is commonly referred to as house flipping.

For an investor, you will be buying the property to collect rent and then sell the house later down the line after growing in value.

As a trader, it will more likely be beneficial to start a company.

This is due to the fact that the profit you make when you quickly flip a house can be considered as a profit rather than capital gains, meaning you will likely be susceptible to higher income tax rates.

To make this profit count as capital gains, you will likely need to prove that you intended to rent the property first.

For investors, the answer is less straightforward, as there is a lot of give and take when it comes to forming a company.

While you will save money on taxes in some aspects, you will be paying for it in others.

Be sure to speak to a financial advisor to see which options make the most sense for you.

RWinvest Liverpool Office RWinvest Liverpool Office

Buying Property Through an Investment Company 

Now that we’ve discussed buying property through limited company, it’s time to address the other definition.

In this section, we will answer what is a property investment company, how to invest in a company, and is it worth your investment?

RWinvest Manchester Office RWinvest Manchester Office

What Is a Property Investment Company? 

property investment company is a company that sources property investment opportunities.

The company will collaborate with property developers to offer investors the latest properties on the market, usually with below-market rates.

Property investment companies will often help investors with their venture by recommending solicitors or property management companies, making the process easier and more efficient.

RWinvest Liverpool Office RWinvest Liverpool Office

Do All Investors Buy Property Through a Company? 

No, not every person who invests in property will buy property through a property investment company.

Many investors choose to purchase property more independently, perhaps by buying a property in an auction and then fully managing every step of the investment process themselves.

While this is a good option for many investors, those who buy property in this way can miss out on many benefits that come from buying property through limited company.

Find Luxury Property at Every Price Point With Off-Plan Apartments From Just £66,995 Today

View Properties

The Benefits of Buying Property Through a Company (Property Investment Companies)

The Cons of Buying a Property Through a Limited Company (Property Investment Companies)

Merchant's Wharf - Exterior Merchant's Wharf - Exterior

Investing Through a Limited Company Offers Less Hands-on Experience 

While buying property through a company is less time-consuming and can be viewed as a benefit by many, those seeking a more hands-on investment may be put off by this.

Unless you opt for a hands-on investment, investing with a property investment company can seem restrictive for those who want to gain first-hand experience.

Not only will you not need to spend time searching for your ideal property or calculate rental yields, but you will also not gain any landlord experience if you opt for a property management company.

Of course, this is only considered a ‘con’ depending on your individual circumstances and investment goals.

If you’re buying property as a way to build a lucrative portfolio alongside your regular commitments, then buying property through a company is the perfect option.

On the other hand, if you’re looking for a more hands-on approach and want to do everything yourself, it’s unlikely you will enjoy the investment process with a company.

Investing Through a Limited Company May Feel Limiting for Some 

Those who choose to invest through a property company may find that they have a smaller choice of property types to invest in than those pursuing a more independent venture.

Here at RWinvest, for instance, we specialise in off-plan residential and student properties, focusing on apartments rather than houses.

This is because we recognise the potential behind well-located apartments and their ability to attract high demand and strong yields.

However, certain investors, such as those who would prefer to purchase an HMO (House of Multiple Occupancy), would be less likely to buy a property through a company.

Buying a house through a limited company is less likely as flats tend to be more popular, especially with investment companies that focus on city-centre locations.

3 Units Remaining

The Summit

Stylish Baltic Triangle Living

Liverpool Prices from £139,950

Assured 7% NET Rental Yields

15-20% Below Market Value

Invest From £35,000

ELEMENT - The Quarter

North West's First Eco-Development

Liverpool Prices from £74,950

8% NET Rental Return

300m Away From New £1bn Royal Hospital

10% Deposit

Off Market Manchester Apartments

Premium Residential Investment

Manchester Prices from £219,112

5.5% NET Rental Return

10% Deposit Required

Is It Better to Buy Property Through a Company When Investing in Buy to Let Property? 

While it is entirely down to your own goals and preferences when investing in property, there are more benefits of buying property through a company than there are downsides.

Buying property through a limited company that specialises in property investment allows investors to make savings, generate assured rental yields, and build up their confidence and knowledge on the buy-to-let sector.

How to Decide Whether Buying Property Through a Company is Right for You (Property Investment Companies)

Do you plan on being a hands-on investor and taking control of every aspect of the investment? Or are you a first-time investor who doesn’t have much experience in the property industry?

The first step you should take to decide whether or not buying property through a company is the best option for you is to think about your own property investment needs.

Think about whether you would benefit from the time-saving aspects of investing in property through a company or whether you would prefer to make a more solo investment.

Research is vital, and spending some time reading up on property investment companies and evaluating the different companies available to you is a good step to take.

You may also want to seek professional advice from a financial advisor or speak to those who have experience buying property through a company to get a better sense of what’s involved.

Every property investor needs to set an investment budget. By doing this, it may become more obvious whether or not you should be investing through a limited company.

For instance, if you have a smaller budget for your investment but you’re still looking to make the most attractive returns possible, then buying property through a company would make sense due to the below-market rates available.

Take some time to really plan out your budget, and be sure to factor in all possible costs, including stamp duty land tax (STLD), capital gains tax (CGT), and mortgage repayments.

If you’re unsure of the amount of tax you might need to pay, you could seek out professional advice to get a more accurate estimation.

On top of any tax bills and repayments, you should also consider any extra fees you might need to pay.

If you do decide that buying property through a limited company is right for you, remember that you’ll need to pay a small fee to the property management company you work with.

Assess Your Needs and Goals

Do you plan on being a hands-on investor and taking control of every aspect of the investment? Or are you a first-time investor who doesn’t have much experience in the property industry?

The first step you should take to decide whether or not buying property through a company is the best option for you is to think about your own property investment needs.

Think about whether you would benefit from the time-saving aspects of investing in property through a company or whether you would prefer to make a more solo investment.

Do Your Research

Research is vital, and spending some time reading up on property investment companies and evaluating the different companies available to you is a good step to take.

You may also want to seek professional advice from a financial advisor or speak to those who have experience buying property through a company to get a better sense of what’s involved.

Think About Your Budget

Every property investor needs to set an investment budget. By doing this, it may become more obvious whether or not you should be investing through a limited company.

For instance, if you have a smaller budget for your investment but you’re still looking to make the most attractive returns possible, then buying property through a company would make sense due to the below-market rates available.

Take some time to really plan out your budget, and be sure to factor in all possible costs, including stamp duty land tax (STLD), capital gains tax (CGT), and mortgage repayments.

If you’re unsure of the amount of tax you might need to pay, you could seek out professional advice to get a more accurate estimation.

On top of any tax bills and repayments, you should also consider any extra fees you might need to pay.

If you do decide that buying property through a limited company is right for you, remember that you’ll need to pay a small fee to the property management company you work with.

How to Invest Through a Property Investment Company Like RWinvest

Shaw Street Bedroom - Student Investment Property in Liverpool Shaw Street Bedroom - Student Investment Property in Liverpool

1. Research Companies 

If you decide to buy a property through a company, you should make sure that you select the best possible company to work with.

This is why it’s crucial to research both the property investment company you’re looking to buy from and the property developer behind the development.

By reading reviews, looking at online press coverage, and learning more about the company structure, you can usually find out whether or not they’re experienced enough to facilitate a strong investment.

2. Find the Best Investment Opportunities 

There are so many different investment opportunities to choose from that it can become overwhelming.

Luckily, when buying a house through a limited company that specialises in buy to let investment, searching for your investment can become much more straightforward.

Here at RWinvest, we display all of our latest opportunities on our website, providing information and CGI imagery for each listing.

However, even if browsing for buy to let opportunities online isn’t your forte, you can always give us a call instead.

3. Arrange a Call or Meeting

Once you’ve found a property you’re interested in, whether through browsing listings on a website or by recommendation, the next step in buying property through a company is arranging a more in-depth call or meeting with the investment company.

Doing this allows you to ask any further questions and view the property site or a showroom if possible.

Here at RWinvest, we have a showroom based in our Liverpool offices, along with a VR headset that allows ‘virtual viewings’ of many of our projects.

If you’re unable to visit our offices or take a real-life tour due to Covid-19 restrictions, we also offer virtual tours and meetings for all current and future clients.

Earn Huge 8% Assured Returns On North West In Demand Properties Now

View Properties

FAQs

Buying property through a limited company you have set up can be highly beneficial as you can save money on income tax and get mortgage payment relief. However, it may be difficult to secure a mortgage, as lenders don’t like lending to limited companies.

Yes, a limited company can secure a mortgage from lenders, but it can be difficult. In recent years, mortgage availability for limited companies has been less than the availability for normal investors as lenders don’t like lending to limited companies.

If you’re asking what are the pros and cons of owning a second home in UK areas , property investment is one of the most beneficial investment classes in the UK.

Not only can you earn regular income each month through rent, but you can also sell the home further down the line for a huge cash payout.

When it comes to cons, you may have a poor investment if you don’t research appropriately to identify areas with the highest growth potential. Property is also a long-term investment, so if you’re looking for a quick turnover, property investment is likely not for you.

Is it Better to Buy Property Through a Limited Company?

Buying property through a limited company you have set up can be highly beneficial as you can save money on income tax and get mortgage payment relief. However, it may be difficult to secure a mortgage, as lenders don’t like lending to limited companies.

Can a Limited Company Get a Mortgage?

Yes, a limited company can secure a mortgage from lenders, but it can be difficult. In recent years, mortgage availability for limited companies has been less than the availability for normal investors as lenders don’t like lending to limited companies.

What Are the Pros and Cons of Owning a Second Home in UK?

If you’re asking what are the pros and cons of owning a second home in UK areas , property investment is one of the most beneficial investment classes in the UK.

Not only can you earn regular income each month through rent, but you can also sell the home further down the line for a huge cash payout.

When it comes to cons, you may have a poor investment if you don’t research appropriately to identify areas with the highest growth potential. Property is also a long-term investment, so if you’re looking for a quick turnover, property investment is likely not for you.

Are You Interested in Buying Property Through an Investment Company? Choose RWinvest 

We hope you enjoyed our guide to buying property as a limited company.

The two popular methods of buying property are setting up your own limited company or using the services of an already established investment company.

If you’re keen on the latter and want to begin your investor journey, get in touch with RWinvest today.

We’re a limited company that specialises in finding investors the best buy to let opportunities on the market today.

With registered office headquarters in Liverpool, Manchester, and London, we work hard to bring our clients high-quality properties in key UK cities, while identifying the best investment deals and below-market discounts available.

Due to our market expertise, we carefully select properties in top locations like Liverpool and Manchester. These cities are typically valued as the best place to invest in property UK, thanks to high growth levels and huge demand for rental property.

For anyone wondering how to get into property, we can guide you through building a lucrative property portfolio with our wide range of off-plan developments.

Take a look at our latest student and residential property developments to find your perfect opportunity today.

Disclaimer:

Our guide to buying property through a company is offered as guidance and should not be considered investment advice. For professional advice on things such as taxes, interest rates, mortgage applications and more, readers may wish to speak to experts such as a financial advisor or mortgage broker.

3 Units Remaining

The Summit

Stylish Baltic Triangle Living

Liverpool Prices from £139,950

Assured 7% NET Rental Yields

15-20% Below Market Value

Invest From £35,000

ELEMENT - The Quarter

North West's First Eco-Development

Liverpool Prices from £74,950

8% NET Rental Return

300m Away From New £1bn Royal Hospital

10% Deposit

Off Market Manchester Apartments

Premium Residential Investment

Manchester Prices from £219,112

5.5% NET Rental Return

10% Deposit Required