What is a UK property investment company?
Why do UK landlords use a property company to save tax?
What are the key benefits of using a company for property investment?
Using a UK property investment company can be a tax-efficient way for landlords and property investors alike to maximise their rental incomes.
What are the basics of UK property investment companies?
A property investment company is a vehicle to help UK landlords to invest in property.
Property investment companies are different and can specialise in various types of property investment like purpose-built student accommodation, HMOs, traditional residential property, and off-plan.
They can also offer investment opportunities with specific selling points, such as properties with high rental yields or long-term capital growth potential.
An investment company includes any company (corporation, business trust, partnership or limited company) that issues securities and invests in securities.
UK landlords may invest property personally or through a property investment company.
An investment property refers to acquiring property to obtain a return on the investment by rental income, property resale, or both.
Using a company for property investment is a popular way for UK landlords to grow property portfolios.
Are there different types of UK property investment company?
Different types of UK property investment company options can be utilised.
The main choices are:
Special Purpose Vehicles (SPVs)
Property investment companies are the UK’s most popular method for property investors.
Over the last four years, the number of landlords who have put their buy-to-let properties into a company has doubled.
According to Companies House, 47,400 new buy-to-let companies were incorporated in the UK in 2021.
This represents the highest number on record.
An SPV is a limited company for a specific purpose, such as property investment.
When used as a UK property investment company, it is used to purchase and rent out properties.
Trading limited company:
There is a different type of limited company set up for property trading businesses.
These can include activities such as property flipping and rent-to-rent.
There are specific rules to observe when setting up a limited company for buy-to-let property investment.
It is also worth researching how to transfer property to a limited company.
What are the benefits of using a company for UK property investment?
Some landlords choose to enlist the help of a property investment company when investing in buy-to-let property.
Some of the main benefits of this include:
– UK property investment companies find top opportunities
– Landlords get connected with property management firms in the UK
– Investors get access to low property prices
– Landlords can get exclusive deals by working with a UK property investment company
– Affordable plans make property investing achievable and lower-risk
– The process of property buying is simplified
– Working with a UK property investment company builds confidence for first-time landlords
The biggest benefit is time-saving.
UK property investors have time-consuming elements done for them by the investment firm.
This includes monitoring websites such as Zoopla and Rightmove, researching online, and booking property viewings.
This can be preferable for UK landlords who work full-time and don’t have the time to research and purchase properties for their own portfolio.
What are the pitfalls of investing through a UK property company?
Not every property investment strategy is suitable.
Some UK landlords are put off by the potential pitfalls of working with a property investment company, such as:
– Patience is required when investing in off-plan
– Hands-on experience will be minimal
– The choice of investments could be limited
Off-plan properties can take six to 12 months to reach completion, so property investors need to be patient during the building process.
It is possible to purchase properties from a UK investment company that are already complete.
Does a UK property investment company pay less Stamp Duty?
Many landlords and property investors we work with choose to invest through their own limited companies.
From April 2020 a personally-owned buy-to-let property investment could no longer have the mortgage interest payments offset as an expense against rental income on self-assessment tax returns.
This is not the same situation for limited companies that hold property.
Mortgage interest payments remain an allowable expense to reduce profits and corporation tax.
UK landlords should be aware that their limited companies are still liable to pay the 3% Stamp Duty Land Tax (SDLT) surcharge when property costs more than £40,000.
Furthermore, SDLT is charged at 15% on residential properties costing £500,000 and over.
The SDLT rate is also exempt for companies that purchase properties for a property rental business, property developers and traders, property occupied by employees, a housing co-operative, farmhouses, and financial institutions buying property in the process of lending.