Can you manage property via a limited company, but take out a personal BTL mortgage?

[cakehoover123]

Hi MN. I'm new to the renting game, so I really hope this isn't confusing!

My DH and I are both higher-rate taxpayers. We have a property we own (in our own names) outright worth £370k, and would like to move to a bigger property worth £700k.

We are thinking of getting a BTL remortgage on the £370k property and letting it out, so we can use the mortgage cash released to part-fund the bigger property. This isn't to make money - more that we're attached to the current place and would like the flexibility of two properties.

We think it makes sense to set a limited company SPV to manage the rental property, as there would be much less tax to pay on the interest.

However, these are the questions:

1. In order to put the rental income through the SPV, would the SPV need to become the legal owner of the £370k house - or could we keep it in our names?
2. If the answer is "yes, you'd need to sell to the SPV"... then would any BTL mortgage also need to be taken out by the SPV?
3. And if the answer is "yes, the SPV would have to take out the mortgage"... then how would we get the mortgage money "out" of the SPV, so we could buy the bigger house ourselves? Would we need to take it as a dividend/profits and pay tax on that?

Thanks for reading. Very grateful for suggestions!

Not a financial advisor but I’m not sure if this would be better? As I understand it the answers are Yes, Yes and Yes (dividends can only be paid if you’ve got enough profit though) but with only one property in the SPV how will it be better economically?
You will need to sell the property, and the SPV company will need to buy it. So you will presumably have to pay capital gains tax personally on that? The SPV will be presumably be liable for stamp duty on the purchase of your property? And then have enough profit to pay dividends to yourself.

Won't you then have to pay corporation tax on the rental profits and then tax on any dividends you take? Doesn't sound very tax efficient with the new rates.

Yes. The SPV will owe corporation tax on the rental income and the there will be dividend tax to pay of 33.75% if the OP is still a higher rate tax payer. That’s why I think it’s not economical having an SPV if there is only one property in it.

Thank you all. I was wondering if I'd misunderstood something fundamental... sounds like I have! I will go away and do some homework research.

If you look at the return on BTL, you get more in a high interest, fixed term savings account, and arguably in the stock market, with zero stress.
Just sell it and have a lower mortgage, less stress, in your new home.