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This guide explores the four most commonly used SIC codes for BTL companies, explains why lenders favour Special Purpose Vehicles (SPVs) over trading companies, and provides insights into ensuring your limited company meets lender requirements.
For BTL landlords, choosing the right SIC code signals to lenders that your company’s sole purpose is property investment, which can improve your chances of securing a mortgage.
Covers companies that buy and sell real estate for their own account.
Uses: Suitable for property flipping or trading, but it’s still acceptable for BTL purposes if your activities involve buying properties and holding them for rental income.
Covers companies letting and managing owned or leased real estate, excluding social housing.
Uses: The most commonly used SIC code for BTL landlords as it directly applies to rental income activities.
Refers to managing properties on behalf of others or as part of a portfolio.
Uses: Useful for landlords who self-manage their properties or manage for others in a limited capacity.
Covers companies involved in renting and operating residential real estate.
Uses: Suitable for landlords focusing solely on residential properties, excluding commercial properties.
Tip: Consult with an accountant or property expert to confirm which SIC code best suits your investment strategy.
Many lenders require that limited companies applying for BTL mortgages operate as Special Purpose Vehicles (SPVs) rather than trading companies.
What is an SPV?
An SPV is a limited company established solely for a specific purpose, such as holding and managing rental properties. Unlike trading companies, SPVs have no additional business activities, making them simpler and more transparent for lenders.
Reasons Lenders Prefer SPVs
SPVs have a single purpose, making their financial activities straightforward to assess. Trading companies often have multiple revenue streams, complicating financial reviews.
Lenders view SPVs as lower risk since they don’t engage in activities unrelated to property investment. Trading companies might face market fluctuations unrelated to the property sector, increasing risk.
SPVs are typically structured with clean financials, focused solely on property income. Trading companies may have complex accounts with varied expenses, making it harder for lenders to evaluate.
SPVs ensure separation of property-related liabilities from other trading activities, reducing risk for both lenders and landlords. Trading companies may expose landlords to greater tax and legal challenges.
Example: A trading company running a retail business might struggle to secure a BTL mortgage because its primary activity is unrelated to property investment. By contrast, an SPV focused solely on property rentals signals stability and predictability.
Selecting an inappropriate SIC code or operating a trading company can lead to:
Mortgage Rejections: Lenders may decline applications if the SIC code doesn’t reflect property investment activities.
Higher Interest Rates: Trading companies are perceived as higher risk, which may result in higher mortgage costs.
Regulatory Challenges: Inaccurate SIC codes can lead to compliance issues with Companies House and HMRC.
Tip: If you’ve chosen the wrong SIC code, you can update it through Companies House. Consult an accountant to ensure accuracy.
When forming your limited company, ensure you select the appropriate SIC code(s) that align with property investment activities.
Maintain separate accounts for property income and expenses to make it easier for lenders to assess your application.
Hire an accountant or mortgage broker specialising in property to ensure compliance and maximise your chances of securing competitive mortgage rates.
Many lenders specialise in SPV mortgages and offer competitive rates. Research lenders or work with a broker to find the best fit.
Choosing the right SIC code and setting up your limited company as an SPV can significantly improve your chances of securing competitive BTL mortgages. Lenders prefer SPVs for their simplicity, transparency, and reduced risk compared to trading companies.
If you’re planning to invest in Buy-to-Let properties, partnering with property finance experts can ensure your SPV is structured correctly and aligned with lender requirements. Contact Auction Finance today to start your journey toward smarter property investments.
Ans: Yes, you can select up to four SIC codes if your company has multiple activities, but for BTL SPVs, it’s best to keep it simple and focus on property-related codes.
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