Is Ltd company status good for someone who is not a higher rate tax payer

  • Filter
  • Time
  • Show
Clear All
new posts

    Is Ltd company status good for someone who is not a higher rate tax payer

    Hi, I have a relative who is a lower rate tax payer but is with a friend in a Ltd. property development company. They have converted a house to 3 flats and now seem to need an SPV and need to get a mortgage on those flats to raise funds. There seem to be so many hoops to jump with Ltd company status and getting mortgages is so expensive compared to normal BTLs.

    Also can you tell me if it is cheaper to get an MUFB or individual mortgages on two of the flats to raise the funds? Does an MUFB require leases on the flats? Thank you.

    Let’s take your questions in reverse order

    Yes it is mandatory that if the flats are to be mortgaged separately that each has its own lease whereas raising a single mortgage on the building then that is not necessary as the charge is placed over the entire Freehold Building.
    There is an assumption that Ltd Co mortgages are very expensive compared to those for private individuals ,yes they are slightly higher but not significantly.
    Anyone considering borrowing via an SPV Company should consult with a Chartered or Certified Accountant to establish what are the true financial benefits of such borrowing against personal borrowings, certainly what can be charged against rental income is presently a major consideration but there is no guarantee that this will remain the case going forward ( I am not a crystal ball gazer) Do Not rely on so called experts who are not qualified accountants , even as a broker I am not permitted to utter such advice even though I understand the pros & cons.
    If you intend to retain two flats and sell the third might require you to source two lenders since there is a reluctance for any lender to have such an exposure in a single building but a good mortgage broker experienced in Buy to Let can provide advice.
    I hope the above helps.


      If a house is purchased under a freehold title by a Ltd company and subsequently converted into 3 flats, the property becomes a MUFB ( multi-unit freehold building ) if remaining under the same freehold title.

      The Ltd company seeking a loan will find interest rates are much higher because there are fewer lenders offering business loans to limited companies in property development . The Lender will take the freehold title as security for the loan.

      Flats in England and Wales must be under 99 or 125 years long lease to qualify for a mortgage loan because the Council of Mortgage Lenders requires individual flats to be under a maintenance contract which is satisfied by the long Lease. The lender will take the leasehold title of the flat as security for the mortgage loan . Some lenders may only lend on one flat in the building to reduce their risk .

      There is a much larger market for sale of leasehold flats and many more lenders offering residential mortgage loans at lower interest rates to buyers.

      So if the Ltd Company continues in property development, then you probably need hold the leasehold flats under another company to benefit from lower interest rates.


        Thank you for your replies.


        Latest Activity


        • Turning a btl to holiday home
          by riva
          I have a btl that was undergoing renovations that just completed before the pandemic hit. So I've never let it and ended up using it every so often as a holiday home as it was vacant. We now love it so much that I'd like to continue using it like that. I may also consider the occasional air bnb or friends/family...
          17-06-2021, 08:44 AM
        • Reply to Turning a btl to holiday home
          by loanarranger
          What you are hoping to achieve falls outside of Non Regulated Mortgages unless the lender accepts Holiday Let’s and as already mentioned are Let for the minimum prescribed period, so in addition to avoiding foul of your lender you then need to ensure that the property Insurance is in line with standard...
          18-06-2021, 21:00 PM
        • Reply to Turning a btl to holiday home
          by DPT57
          You have to pay CGT on a holiday home as well as a rental property, so it won't alter the position if you sell.
          18-06-2021, 10:36 AM
        • Reply to Mortgage News
          by loanarranger

          Given the media reports of high demand for property across most of England resulting in properties being sold at significantly higher prices and the failing service of lenders , solicitors in providing speedy service to applicants/clients,...
          17-06-2021, 17:49 PM
        • Mortgage News
          by loanarranger
          The following article has appeared in one of the Mortgage Trade journals reporting on views expressed by the Association of Mortgage Intermediaries an influential trade body within the mortgage industry.

          "Mortgage rates are likely to rise in the first quarter of 2016 as lenders look...
          23-12-2015, 19:43 PM
        • Reply to Turning a btl to holiday home
          by OopsieDaisy
          Furnished Holiday Lets must be available to rent for 210 days a year (30 weeks) and actually rented out for 105 days a year (15 weeks), excluding any time that you as the owner occupy the property - these are the HMRC criteria.
          To qualify for business rates, the property must be available to rent...
          17-06-2021, 15:28 PM
        • Reply to Turning a btl to holiday home
          by landlord-man
          For a Holiday Home you must make it actively available for lettings 105 days per year.

          You can split income/profits at whatever % you wish with your partner - very handy if one of you works etc

          You dont pay Council Tax but register to Business Rates - which you can claim 100%...
          17-06-2021, 14:45 PM
        • Reply to Turning a btl to holiday home
          by jpkeates
          Looks like a great site!...
          17-06-2021, 09:39 AM
        • Reply to Turning a btl to holiday home
          by Mrs Mug
          Yes, there is. See the link below,

          17-06-2021, 09:18 AM
        • Reply to Turning a btl to holiday home
          by jpkeates
          I would imagine that it would mean a remortgage - most BTL mortgage terms wouldn't allow the use of the property as a holiday let.

          There are quite specific rules about how long properties have to be available and actually let to qualify as a holiday let which might make the accounting more...
          17-06-2021, 09:00 AM