Buy

Buy-to-let stress tests typically require rental income to cover 125–145% of the monthly interest payment, but this threshold drops to 100% for limited company borrowers with some specialist lenders.

To ensure borrowers can survive interest rate spikes, the Bank of England requires lenders to apply an Interest Coverage Ratio (ICR) stress test. For individual landlords paying higher-rate tax, lenders typically require the rental income to cover 145% of the mortgage interest, assuming a hypothetical interest rate of around 5.5%.

This stringent test limits the maximum leverage available, especially in low-yield areas like London and the South East. However, because Limited Companies (SPVs) pay lower Corporation Tax and can deduct 100% of mortgage interest, they are inherently more profitable. Recognizing this, lenders drop the ICR requirement for SPVs down to 125%. In highly specialized scenarios, some lenders offer "top-slicing" or 100% ICR products for SPVs, allowing the borrower to leverage higher loan-to-values (up to 75% or 80%) on properties that would fail the stress test under a personal name.