How to: Set Up a Limited Company for Property Investing

Setting up a buy-to-let company has become increasingly popular among property investors in the UK. With tax advantages, reduced personal liability, and flexibility in managing property portfolios, 74% of buy-to-let property purchases in 2023 were made through limited companies. However, creating and managing such a company requires attention to detail and careful planning to maximise the benefits. In this guide, we’ve put together all the key steps and considerations for forming a limited company for property investment.

1. Key Reasons to Use a Limited Company Structure

Before we dive into how to set up your limited company for property investment, let’s take a look at why you might use a limited company when investing. Determining which structure to use is an important step to meeting your investment goals, and limited companies can be a great tool for profitable property investment.

Investing in property through a limited company offers several benefits. One major reason for the rise in popularity is the tax efficiencies available, particularly since mortgage interest relief for landlords has been reduced. When you purchase property through a company, the mortgage interest can still be deducted as a business expense, lowering your corporation tax liability. Additionally, company-owned properties may benefit from lower capital gains tax rates when sold, compared to the rates applied to personal ownership.

Another advantage is asset protection. Owning properties through a limited company allows you to separate your personal finances from your business operations, providing legal protection if the company faces financial difficulties.

Lastly, having a company structure can help you scale your portfolio. It allows for easier co-investing with partners — whether that is family, friends, or professional investors — while setting clear terms for ownership, profit sharing, and responsibilities.

If you're interested in calculating your savings through a limited company, fill in your details below and access our calculator. 

2. The Steps to Setting Up Your Limited Company

2.1. Registering Your Company

To set up a limited company, you need to register with Companies House, the UK's registrar of companies. This can either be done yourself or using a company formation agent. During the registration process, you must specify a Standard Industrial Classification (SIC) code that accurately represents your business activity.

For limited companies created for property investment purposes, the correct SIC code is 68209, this is for property-owning companies that let and operate real estate. Using the wrong SIC code may cause issues later down the line, especially when applying for a buy-to-let mortgage, as lenders require assurance that the company’s sole purpose is holding investment property

2.2. Setting Up a Business Bank Account

A business bank account is crucial for managing your property investments, and many mortgage lenders will require it for financing approval. Having a separate business account ensures you can track income and expenses, including rental payments, mortgage interest, and property maintenance costs. It also keeps your personal finances distinct from your business activities, making accounting and tax reporting simpler.

When choosing a bank account, it should meet the following criteria:

• UK sort code and account number
• Direct debit functionality
• Ability to accept payments through CHAPS, BACS, and Faster Payments
• International capabilities (IBAN and BIC) for investors based overseas​

2.3. Choosing Shareholders and Directors

The structure of your company will include shareholders and directors. Shareholders own the company, while directors manage its daily operations. In smaller limited companies, it is common for individuals to act as both shareholder and director. However, it’s important to clearly define roles and responsibilities in legal documents such as a Shareholders’ Agreement. This agreement is particularly important if you're investing with others, as it outlines how decisions will be made, how profits will be distributed, and how disputes will be resolved​.

Moreover, if you're planning to finance the company through personal contributions, you may consider setting up a Director's Loan Agreement. This allows you to lend money to your own company and repay yourself later from company profits. We will explore how you can optimise your investment with a Directors Loan in the 'Optimising Your Company for Tax Efficiency' section.

2.4. Appointing a Registered Office

Your company must have a registered office in the UK, where official correspondence is sent. You can use your home address, but this may expose your personal details to the public. Alternatively, you can use a service to provide a registered office address, which enhances privacy and security. Many company formation services, like GetGround, offer this as part of their packages.

If you do not reside in the UK and finance your purchase with a mortgage, you will also need a process agent after accepting the mortgage offer. A process agent is mandatory by law and its role is to receive formal notices on behalf of the borrower, such as if they default on the loan. They then forward these notices to the borrower. Again, this is another service provided by many company formation or registered office providers such as GetGround.

3. Legal Documents Required a Limited Company

A well-structured limited company requires certain legal documents. These include:

• Memorandum and Articles of Association: These set out how the company will be run, defining the powers of directors and rules for managing the company.
• Shareholders’ Agreement: As mentioned, this document is crucial when multiple investors are involved, ensuring transparency and protecting all parties' interests.
• Director Loan Agreements: If the business is funded by the company directors, these agreements outline the terms under which the directors can be repaid​

4. Optimising Your Company for Tax Efficiency

Tax is one of the biggest considerations when setting up a limited company — the Section 24 tax changes have made it harder for landlords who own property in their personal name to deduct mortgage interests, significantly increasing their tax bills. However, owning properties through a limited company allows mortgage interests to be deducted as a business expense, reducing your tax paid.

Limited companies also give you more flexibility with dividend payments. You can leave profits within the company to reinvest or withdraw them through dividends, which are taxed differently from income tax, potentially resulting in a lower tax burden. However, dividends are subject to their own taxation when paid out, this is something to take into consideration when taking income out of the company to ensure it is done in the most tax-efficient way.

Capital gains tax (CGT) is often more favourable for companies. While individuals may face CGT rates of 14% or 24% on property sales, companies can pay 10% or 20% corporation tax depending on the method of sale.

Another powerful tax-saving tool is the Director’s Loan. By lending personal funds to your limited company, you gain a tax-efficient method for funding the business. When you withdraw loan repayments, they are not subject to dividend tax or National Insurance. This provides a flexible way to access your investment without triggering additional tax liabilities. However, any interest charge would be considered taxable income, leading to increased personal tax liabilities. A Director's Loan, properly managed, can effectively complement dividend strategies and other tax-efficient practices.

5. Managing and Growing Your Property Portfolio

Once your limited company structure is set up and running, the next focus is growing and managing your portfolio. A company allows for easier scalability, especially if you plan to invest in multiple properties. Each property can be held in its own company, reducing liability risks and improving tax planning.

Ongoing company management is important and a compliance requirement. You will need to file annual accounts with Companies House and HMRC, and maintain proper records of your company's financial activity. Most property investors work with professional accountants or use services like GetGround, which handle the administrative work​ and file your accounts.

So, how do you set up a limited company for property investing? 

Setting up a limited company can offer substantial benefits in terms of tax efficiency, liability protection, and portfolio growth. However, it’s a process that requires careful planning, from selecting the right SIC code to managing legal documents and financial arrangements. By understanding these steps and using professional services where needed, you can ensure that your investments are structured for long-term success.

GetGround can create your limited company optimised for tax-efficient property investing and handle the ongoing management and accounting of the company. With access to an online platform, you can access all the information related to your limited company and investment performance in one place while also getting access to a business account designed for limited company investors.

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If you’re ready to get started with designing your limited company, get started below.

However, if you’d rather speak to an expert consultant, get in touch with our team.