Buying rental property through a special purpose vehicle limited company changes both the mortgage lending process and the tax treatment of the profits. This guide explains how SPV mortgages work, why personal guarantees are required, and how Corporation Tax compares with owning the property personally.
What an SPV Is
A special purpose vehicle (SPV) is a limited company set up solely to hold and let residential property, usually registered with a property-letting Standard Industrial Classification (SIC) code. Most lenders offering limited company buy-to-let mortgages require the borrower to be an SPV rather than lending to a company that also trades in other, unrelated activities.
How the Mortgage Differs from Personal BTL
Limited company buy-to-let mortgage rates and fees are often somewhat higher than equivalent personal buy-to-let deals, reflecting the smaller lender pool active in this market. Lenders also typically require the company directors to sign personal guarantees, meaning they remain personally liable for the mortgage debt even though the borrower on paper is the company.
Tax Treatment Inside a Company
Rental profit earned by the company is taxed under Corporation Tax rather than personal Income Tax: 19% on profits up to £50,000 for 2026/27, with marginal relief tapering the rate up to the 25% main rate on profits above £250,000. Crucially, the Section 24 restriction that limits individual landlords to a basic rate credit for mortgage interest does not apply to companies, so mortgage interest remains a normal deductible expense against rental profit.
Moving an Existing Property Into a Company
Transferring a property you already own personally into a limited company is generally treated as a disposal for Capital Gains Tax purposes at market value, and can also trigger Stamp Duty Land Tax, LBTT or LTT on the transfer, since these are usually connected-party transactions assessed at market value rather than at nil consideration. Incorporating an existing portfolio therefore needs careful planning and professional advice well before the transfer.
Frequently Asked Questions
What is a special purpose vehicle (SPV) for buy-to-let?
An SPV is a limited company set up with the sole purpose of holding and letting residential property. Most limited company buy-to-let mortgage lenders require the borrower to use an SPV with a specific Standard Industrial Classification (SIC) code, rather than lending to a general trading company.
Why do landlords use a limited company structure?
The main reason is tax: rental profits in a limited company are taxed under Corporation Tax rules rather than the individual landlord's Income Tax rate, and the Section 24 mortgage interest restriction that applies to individual landlords does not apply to companies, since mortgage interest remains a normal deductible expense for a company.
Are limited company buy-to-let mortgage rates higher?
Typically yes -- limited company buy-to-let mortgage rates and arrangement fees are often somewhat higher than equivalent personal buy-to-let mortgages, reflecting the smaller pool of lenders in this market and additional underwriting requirements for company structures.
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Will I need to give a personal guarantee?
Almost always. Lenders typically require directors of the SPV to sign a personal guarantee, meaning you remain personally liable for the mortgage debt if the company defaults, even though the mortgage is technically held by the company rather than you personally.
Does moving an existing personal buy-to-let property into a company trigger tax?
Usually yes. Transferring a property you already own personally into a limited company is normally treated as a sale for Capital Gains Tax purposes and can also trigger Stamp Duty Land Tax (or LBTT/LTT) on the transfer at market value, so incorporation of an existing portfolio needs careful advance planning.
How is rental income taxed inside a limited company?
Rental profit is taxed under Corporation Tax, at 19% for profits up to £50,000, with marginal relief tapering up to the 25% main rate above £250,000 for the 2026/27 year. Extracting the profit to the director personally (as salary or dividends) creates a further layer of Income Tax or dividend tax at that point.
Do lenders assess ICR differently for limited company applications?
Many lenders apply a lower Interest Coverage Ratio requirement (often 125%) to limited company applicants regardless of the director's personal tax band, since the company is not subject to the Section 24 restriction that leads lenders to apply a higher ICR to higher-rate individual taxpayers.
Is a limited company buy-to-let mortgage right for every landlord?
Not necessarily -- the higher mortgage rates, additional accounting costs, and tax on extracting profit from the company can outweigh the Corporation Tax benefits for smaller portfolios or basic rate taxpayers. It is generally worth comparing the after-tax position personally and through a company, ideally with an accountant, before incorporating.
Disclaimer: This guide reflects 2026/27 Corporation Tax rates. Mortgage lending criteria vary by lender and change over time. This guide is for general information only and is not tax or mortgage advice. Consult a qualified accountant or mortgage broker and refer to gov.uk before making a decision.
