Investing in a buy-to-let property remains a popular strategy for building wealth and for generating additional income.
However, the question of how to hold those properties either personally or through a company has become more pressing in recent years, especially since tax changes affected the profitability of personally owned rental properties.
One increasingly common route is to purchase BTL properties through a Special Purpose Vehicle (SPV), This is a type of limited company specifically set up for property investment. But is this structure right for you?
Let’s look at the pros and cons of using an SPV to hold your BTL portfolio.
Pros of using an SPV
1. Tax efficiency (corporation tax vs income tax)
When you own property personally, rental income is taxed at your marginal income tax rate (up to 45%).
In contrast, profits within an SPV are taxed at the corporation tax rate (currently 25% as of 2025), which can be significantly lower.
If you don’t need to draw out all the profits immediately, retaining earnings within the company can lead to better long-term tax efficiency.
2. Mortgage interest relief
One of the major advantages of an SPV is the full tax deductibility of mortgage interest. Individuals can now only claim a basic rate (20%) tax credit on mortgage interest, but SPVs can deduct the full interest amount before calculating taxable profits.
3. Clear separation of personal and business finances
An SPV keeps your property activities distinct from your personal finances. This separation can:
- Simplify accounting
- Reduce personal liability
- Make business performance clearer to track
4. Inheritance and estate planning
SPVs offer more flexible options for succession planning. You can pass on shares in the company rather than the properties themselves, which may help reduce inheritance tax liabilities with careful structuring.
5. Joint ventures and investment flexibility
Bringing in partners or outside investors is more straightforward via an SPV. You can issue shares or create shareholder agreements without transferring property titles.
Cons of using an SPV
1. Higher mortgage rates and fewer lenders
BTL mortgages through an SPV often come with:
- Higher interest rates
- Higher arrangement fees
- More limited lender options
This can increase the cost of borrowing, especially for new investors or small portfolios.
2. Administrative burden
Operating a limited company means:
- Filing annual accounts and corporation tax returns and the need for an accountant and or tax adviser
- Legal fees associated with formation and any future changes to the SPVs structure
- Preparing formal records (e.g. board minutes, company register)
- Potential need for accountants and legal advisors
This adds both complexity and cost.
3. Tax on dividend extraction
If you want to pay yourself from your SPV’s profits, you’ll typically do so via dividends, which are subject to dividend tax. This can reduce some of the tax efficiency benefits, especially for higher-rate taxpayers.
4. Capital gains tax (CGT) when transferring existing properties
If you already own BTL properties personally, transferring them into an SPV is treated as a sale for tax purposes. You may face:
- Capital Gains Tax
- Stamp Duty Land Tax (SDLT), including the 3% surcharge
This makes moving existing properties into an SPV potentially expensive and often only worthwhile if building a new portfolio from scratch.
5. Less flexibility in personal use
Properties in an SPV are owned by a company, so using them personally (e.g. as a second home or letting to relatives) could create complications or tax consequences, assuming they are mortgage free or you get the lenders consent to do so.
So, is an SPV right for you?
An SPV can offer compelling tax and structural advantages, particularly for higher-rate taxpayers, portfolio landlords, and long-term investors who want to retain profits within the business. However, it also comes with higher admin costs, borrowing challenges, and dividend tax considerations.
You might benefit from an SPV if:
- You’re building or planning a portfolio of 3+ properties
- You don’t need to withdraw rental income immediately
- You want to involve partners or pass the business to heirs
It might not be worth it if:
- You’re only buying one or two properties
- You rely on rental income for living expenses
- You want minimal administrative hassle
Final thoughts
There’s no one-size-fits-all answer. The right structure depends on your investment goals, income needs, tax position, and long-term plans. Before setting up an SPV, speak with a qualified accountant or property tax advisor to model the outcomes for your specific situation.
Disclaimer: This blog post is for informational purposes only and does not constitute financial or tax advice. Always consult a professional before making investment decisions.
Your property or properties can be repossessed if you do not keep up repayments on any loans secured against them.
Image
Gallery.
