Can a Limited Company Buy a House

Yes, a limited company can buy a house in the UK. In fact, company property ownership has become increasingly common, particularly among landlords and property investors. A limited company can legally own residential or commercial property, provided the company is registered with Companies House and has the appropriate provisions in its articles of association. Whether it is a good idea, however, depends on your goals, tax position, and long-term investment plans.

Understanding the legal, tax and financial implications is essential before proceeding, as the rules for company-owned property differ from those for individuals.

Why Buy Property Through a Limited Company?

Buying property through a limited company is usually done for investment purposes rather than as a primary residence. One of the main advantages is related to tax. Limited companies currently pay Corporation Tax on rental profits rather than Income Tax, which can be beneficial for higher-rate taxpayers. Companies can also deduct the full cost of mortgage interest as a business expense, a tax benefit that individual landlords have largely lost due to the phasing out of mortgage interest relief.

Additionally, owning property through a company may offer greater flexibility in terms of profit distribution, inheritance tax planning and reinvesting profits into further property acquisitions.

Legal and Mortgage Considerations

Legally, a limited company can buy and own property in its own name. The company must have the appropriate powers in its constitution to engage in property transactions. If the property is to be rented out, the company should be registered as a landlord and comply with all relevant landlord regulations.

Mortgage options for limited companies are more limited and tend to come with higher interest rates and fees compared to personal buy-to-let mortgages. Most lenders offering these products require the company to be a Special Purpose Vehicle (SPV), which is set up solely to hold and manage property. Directors and shareholders may also be required to provide personal guarantees, as lenders often see limited companies as higher risk.

Tax Implications

One of the main attractions of buying through a company is the difference in how profits are taxed. Individuals pay Income Tax on rental income, which can reach 40 percent or 45 percent for higher earners. Companies pay Corporation Tax, currently at 25 percent for most profits over £50,000, which can result in significant savings.

However, if you want to take profits out of the company for personal use, you may need to pay further tax through dividends or salary, which can reduce the overall benefit. There is also Capital Gains Tax to consider when the property is sold. Companies pay Corporation Tax on gains, while individuals face personal Capital Gains Tax at 18 percent or 28 percent, depending on their income.

Stamp Duty Land Tax (SDLT) is also higher for limited companies buying residential property. The 3 percent additional property surcharge applies to all company purchases, even if it is the only property the company owns. If the property value exceeds £500,000 and it is deemed a residential dwelling, the 15 percent flat SDLT rate may apply unless it is for letting or development.

Administrative and Running Costs

Owning property through a company comes with more administration. You will need to file annual accounts and confirmation statements with Companies House, maintain business bank accounts, and possibly hire an accountant to manage tax filings and compliance. These ongoing costs must be factored into your decision.

If you are transferring a property you already own into a company, be aware that this counts as a sale in legal terms. You may need to pay Stamp Duty and Capital Gains Tax on the transfer, even if you own the company.

Who Is It Suitable For?

Buying property through a limited company is usually suitable for landlords with multiple properties or those planning to build a portfolio. It is also useful for individuals in higher tax brackets or those interested in long-term investment with reinvested profits.

However, it is generally not advisable for people buying a property to live in. Mortgage options are extremely limited for company-owned residential homes intended for use by directors or shareholders, and tax rules become more complex.

Conclusion

A limited company can buy a house in the UK, and in many cases this can be a smart move for landlords and property investors. There are tax advantages and flexibility benefits, but these come with higher administrative responsibilities, mortgage challenges, and different tax treatment when accessing profits. Anyone considering this route should seek tailored advice from a tax adviser or solicitor before proceeding to ensure the decision suits their financial strategy and long-term goals.