There are many ways to buy a house.
You can buy it with a mortgage, with cash, with someone else, alone, and more.
Another route is using a company name to buy a house.
Read on to learn how this is done and its benefits and drawbacks.
Can I buy a house under my company name?
Yes, you can buy a house using a company name.
The details of how you buy it vary (see below). There are several options.
Either way, you should get support from a solicitor. Your limited company needs to be structured correctly.
And if you’ll be living there yourself (usually described as a ‘benefit in kind’), there could be tax and income implications.
(Note: You can also sell your house to your LTD company.)
Ways to pay for a house
With cash
Some companies will buy a house using cash only.
This means buying without a mortgage or loan, which brings several advantages.
Sellers also prefer selling to cash buyers because it adds certainty and speed to sales.
These advantages can even help buyers achieve a slightly lower selling price.
Regular mortgages
Not all lenders will approve a mortgage for this, though. And the ones that do tend to have higher interest rates.
A few years ago, it was even more challenging to do this. But more banks are starting to offer this. It’s typically described as a ‘commercial mortgage’.
The lender usually wants a ‘personal guarantee’ from the company’s director(s).
If the business goes under, the lender can collect the money owed from these individuals instead.
The lender will also want to take a look at your balance sheet. How much money your company has, and how long it’s been trading, are common things they’ll look at.
There’s no set criterion for trading time. Each bank has its criteria for whether you’re trustworthy or not.
A buy-to-let mortgage
Others use a buy-to-let mortgage, which involves only paying interest and not building up equity.
(Borrowers can take out multiple buy-to-let mortgages simultaneously.)
Do I need to make a new company to buy a house through its name?
You aren’t legally required to. But lots of accountants recommend this.
Each limited company has a special purpose vehicle (SPV), which the government uses to determine your business type.
If your SPV indicates that you’re a property company, then the sole purpose and function of the business is to hold property.
Accountants often recommend this when you want to buy a house in a limited company.
If one company fails, it stops the other from being taken down. You may need to sort out an inter-company loan between the two organisations you’re a director of.
Speak to a qualified accountant for advice on all these issues.
Can I transfer funds for a house between two companies?
Yes, you can do this. You should speak to a qualified accountant who can assist you with this.
There are several ways to do this, including via:
- Inter-company loans
- Share purchases
- Dividend payments.
Speak to an accountant who can explain the tax implications.
Documentation will need to be created as well. A solicitor can help you with this.
Can I transfer a house between two companies?
Yes, you can. You should get a solicitor to support you with this.
It’s typically done using a transfer deed or a deed of gift. There will also be tax implications that you should consider.
The process for buying a house under a company name
This is a complicated journey, so the exact steps can sometimes differ based on the circumstances.
This is a guideline for the steps you need to follow. But ensure you get personalised advice from a qualified accountant and/or solicitor.
Register a limited company
You may already have a limited company ready to buy the house for. If not, you should create one.
Ensure you have the funds
Some lenders may have requirements about balance sheets or existing funds. Find this out directly or ask a broker for guidance.
You could transfer the funds in from another company, as outlined above. Or if your business has a long track record, this is fine.
Get a mortgage from a lender
Approach lenders about offering your company a mortgage.
This will often need a personal guarantee. Not all banks offer this, so make sure to shop around.
Make your offer and begin conveyancing
For example, you need a solicitor or conveyancer when buying a house in your name. They can handle all the paperwork once your offer is accepted.
Your conveyancer will check the property. They’ll also need your proof of funding and information about the source of your funds. A transfer deed document can be created.
Advantages of buying a house under my company name
Tax advantages
You can leverage tax benefits if you handle it in the right way. You should get qualified advice on this.
The primary focus is probably on inheritance tax. However, along with this, the income tax and corporation tax thresholds are different.
The rules around capital gains tax and stamp duty may vary.
Utilising unallocated money
Your profits are often stored in the company’s name and not taken as dividends.
Property could be a great solution if it’s all sitting there and you don’t know how to use it. After all, it’s generally a good investment.
You won’t have to pay tax when withdrawing it into your personal name. And it may be far quicker.
Reduced personal risk
By buying a house in your company name, most of the risk is taken by your business.
The lender usually wants a personal guarantee. But this only kicks in if your company goes under. And you may split this with other directors.
In the meantime, the risk is the company’s, not yours.
Disadvantages of buying a house under my company name
Less favourable interest rate
Lenders don’t give the best interest rates on company mortgages.
You will get worse terms compared to someone doing it in their personal name.
No capital gains tax allowance
There isn’t a capital gains tax allowance for companies.
People who buy in their personal name benefit from this.
You lose access to these retained earnings
Retained earnings that you use to buy the house will be lost once you complete the transaction.
This can slow down your business expansion in other areas, especially if it takes a long time to build up those profits again.
