Should I Buy My Buy-to-Let Through a Limited Company? Things to Consider for Glasgow Landlords
By Jack Hellier
Recently, I met a prospective landlord client for a coffee. He’d found a property in Glasgow that he was thinking about buying as an investment, and before we’d even started talking about the property itself, he asked me a question I’m now being asked much more often:
Should I be buying it through a limited company?
It’s a good question, and it’s understandable why people ask it. If you’ve done any research online, you’ll have probably come across articles saying it’s the obvious way to buy a buy-to-let these days.
But it isn’t quite that simple, and my answer was “it depends.”
Buying through a limited company can make a lot of sense, but it isn’t automatically the right choice for everyone. Everyone’s circumstances are different and what works well for one landlord isn’t necessarily going to work for the next. It really comes down to what you’re trying to achieve.
What Are Your Long-Term Investment Plans?
When I asked him what his plan for the next ten years or so was, he told me that this would be his first investment property. He wasn’t sure whether it would be the start of a larger portfolio or simply something to provide another source of income.
That, I advised him, is one of the first things to think about.
Someone buying a single flat to generate an additional income may reach a very different conclusion from someone hoping to steadily grow a portfolio over time. If you’re planning to build a portfolio over the next ten or twenty years, buying through a limited company might make a lot of sense. However, if you’re buying one property and don’t expect that to change, buying personally could be just as suitable.
The right structure often depends less on the property itself and more on what you’re trying to achieve in the long term, as well as your personal tax situation.
Why Are More Glasgow Landlords Buying Through a Limited Company?
Naturally, the conversation turned to tax. There’s no getting away from the fact that tax is one of the main reasons landlords consider limited companies.
Following changes to mortgage interest tax relief over the last few years, buying through a company can be more tax-efficient for some investors, particularly those looking to grow a portfolio. A limited company can usually offset mortgage interest as a business expense before paying corporation tax, something that isn’t available in the same way when you own property personally.
For landlords planning to build a portfolio over time, that can make a meaningful difference. But everyone’s tax position is different, so what works well for one person might not work for another. That’s why I always recommend getting professional tax advice from an accountant before making any decisions.
What About Limited Company Buy-to-Let Mortgages?
He then asked about mortgages. It’s something people often assume will work exactly the same as buying personally.
In reality, there are fewer lenders offering limited company buy-to-let mortgages, and the application process can sometimes be a little more involved. Rates and arrangement fees can also be different. The difference isn’t always significant, but it’s something that’s worth factoring into your overall costs before deciding which route to take. A good mortgage adviser will be able to explain the options available and help you compare them properly.
None of this means it’s the wrong route. It simply means it’s worth understanding the numbers properly before committing.
Are There Any Extra Costs?
Another thing we spoke about was the running costs.
Owning property through a limited company means annual accounts, corporation tax returns, confirmation statements and accountancy fees. They’re all perfectly manageable, but they’re part of the overall picture that need to be factored in to your workings.
How Does the Rental Income Work?
As the conversation continued, I asked him what he planned to do with the rental income.
One thing that’s often overlooked is that the rental income belongs to the company rather than to you personally.
If you want to take money out of the business, there are different ways of doing it, such as salary or dividends, each with their own tax implications.
If you’re planning to leave the profits in the business and reinvest them into another property in a few years’ time, a limited company can work really well. However, if you’re planning to use that rental income to supplement your own income each month, it’s worth understanding how that will work before you buy.
Is Glasgow a Strong Buy-to-Let Market?
We then found ourselves talking less about limited companies and more about the Glasgow property market in general.
I reassured him that despite all the changes landlords have faced over recent years, the Glasgow market, when compared with other UK cities, is very strong. Demand for rental property remains high, particularly in the West End, and well-presented homes continue to attract good tenants, often very quickly.
For landlords taking a long-term view, Glasgow offers some excellent investment opportunities.
So, what’s the ‘best’ approach?
As our conversation came to a close, I reminded him not to assume there’s a ‘best’ way to buy an investment property.
There isn’t a single approach that works for everyone because every landlord’s circumstances are different. Some of our clients buy personally and others invest through limited companies. Both can be the appropriate decision when they’re chosen for the right reasons and with the right advice. I advised him that the best approach depends on your plans, your finances and where you see your portfolio going in the future.
Following our conversation he still had a decision to make about how best to go about things, but hopefully he left with a clearer understanding of the options available to him.
How We Can Help
Whether you’re buying your first buy-to-let property or adding to an existing portfolio, it’s worth taking the time to explore all of your options and speaking to the right people before making a decision.
At Yates Hellier, we specialise in helping landlords buy, let and manage rental property across Glasgow. If you’re thinking about investing in Glasgow and would like to chat through the local buy-to-let market or the ownership structure that might be right for your circumstances, I’d be delighted to help.
You can get in touch with me or a member of our lettings team on 0141 248 8726, or by filling out the form below.