Limited Company (SPV)

A limited company used for property investment is most commonly a Special Purpose Vehicle (SPV) - a company set up specifically and exclusively to hold and manage property assets. The SPV typically has a straightforward structure: one or two directors who are also the shareholders.

The primary tax advantage of holding property in a limited company is the treatment of mortgage interest. Within a company, mortgage interest is a fully deductible business expense. This contrasts with personal name ownership where Section 24 restricts relief to a 20% tax credit. For higher-rate taxpayers with leveraged portfolios, this difference can be very significant.

Additional potential advantages: company profits are taxed at corporation tax rates (19-25%), which may be lower than the investor's marginal income tax rate; profits can be retained in the company and reinvested without immediate personal tax liability; dividend extraction can be timed to manage personal income levels.

Disadvantages: fewer mortgage products available for limited companies; rate premium of 0.2-0.6% over personal name equivalents; SDLT on any future property transfers from personal name to company; cost of running a company and filing accounts; personal guarantees required by most lenders.

SPV company numbers typically include "Property" or "Investments" in the name, and the SIC code is 68209 (other letting and operating of own or leased real estate) or 68100 (buying and selling own real estate).