Limited Company Buy to Let: Pros and Cons

Buying UK rental property through a limited company changes how the profit is taxed and, in many cases, how much a mortgage will cost you. Since Section 24 removed personal mortgage interest relief, incorporation has become a mainstream choice for new purchases rather than a niche one, particularly for higher rate taxpayers building a portfolio. It is not automatically the right answer for everyone, and moving property you already own into a company is a different, more expensive question than buying your next property that way.

Compare ownership routes in our free limited company vs personal tax calculator.

This guide covers why landlords incorporate, how the tax comparison actually works, the mortgage reality, the ongoing costs of running a company, and when the decision is worth paying for proper advice.

Why landlords incorporate

The main driver is Section 24. When you own property personally, mortgage interest is not deductible from rental income; instead you get a 20% tax credit against your bill, which is explained fully in our Section 24 explained guide. For a higher or additional rate taxpayer, this can mean paying tax on income that has already gone to the mortgage lender as interest.

A limited company does not have this problem. It pays corporation tax on profit after deducting mortgage interest as a normal cost of the business, in full, whatever tax band the director happens to be in personally. That single difference is why incorporation comes up in almost every conversation about buying a second, third or later property, especially for landlords who are already higher rate taxpayers through employment or other income.

Other reasons landlords sometimes cite, such as limited liability protection or a cleaner structure for passing property to the next generation, are real but secondary. The tax treatment of borrowed money is almost always the deciding factor in practice.

Corporation tax vs income tax

A company pays corporation tax on its profit: 19% on profits up to £50,000, 25% on profits above £250,000, with marginal relief tapering the effective rate between those thresholds for profit in between (an effective rate of around 26.5% on income within that band). These rates and thresholds apply for the 2026/27 financial year and were confirmed to continue into 2027 under the Finance Act 2026.

This compares favourably with income tax at 40% or 45% for a higher or additional rate individual landlord, especially once you add in the current Section 24 mismatch and the new property income tax rates due from 6 April 2027, when individual landlords in England and Northern Ireland will pay 22%, 42% or 47% on rental profit depending on their band.

The comparison is not as simple as corporation tax rate versus income tax rate, though. Profit inside a company belongs to the company until you extract it, and extraction is taxed again:

• Salary is deductible for the company but subject to income tax and National Insurance in your hands.
• Dividends are paid from post-tax company profit and are then taxed again as dividend income, at rates that depend on your total income, though with a modest annual dividend allowance.
• Retaining profit in the company, to reinvest in another property for example, avoids a second layer of personal tax until you eventually draw the money out, which is one of the more attractive features of the structure for landlords who do not need to live off the rental income immediately.

For a higher rate taxpayer with several properties who plans to reinvest profit rather than draw it out, the company route often wins comfortably. For a landlord who needs to draw most of the profit out each year to live on, the second layer of tax on extraction narrows the gap considerably, and sometimes closes it.

A simplified comparison. Take a higher rate taxpayer with rental profit before interest of £20,000 and mortgage interest of £12,000. Owned personally, tax is charged on the full £20,000 at 40% (£8,000), less a 20% credit on the interest (£2,400), leaving a tax bill of £5,600 against a cash profit of £8,000, a heavy burden relative to what the property actually generates. Owned through a company, corporation tax is charged on the profit after interest, £8,000, at the small profits rate of 19% (£1,520), leaving £6,480 inside the company. That £6,480 is a real improvement over personal ownership while the money stays in the company, but if the director then wants to draw it out as a dividend, a further layer of dividend tax applies on top, which is why the comparison has to include the extraction step and cannot stop at the corporation tax figure alone.

Mortgage reality

The tax advantage only matters if you can get a mortgage on acceptable terms, and limited company buy-to-let lending is a smaller, more specialist market than personal-name lending.

Limited company (SPV) mortgages are widely available, but typically carry a rate premium over equivalent personal-name products, along with higher arrangement fees in many cases. Lenders will almost always want a personal guarantee from the company's directors, which means you remain personally on the hook for the debt even though the company is the legal borrower. Our limited company buy to let mortgage guide covers how lenders assess these applications, typical criteria, and what a broker adds to the process.

The rate premium and fees need to be weighed against the tax saving on a case-by-case basis. For a highly leveraged property owned by an additional rate taxpayer, the tax saving usually outweighs a higher mortgage cost easily. For a lightly geared property owned by a basic rate taxpayer, it may not, since the Section 24 mismatch barely bites at that tax band in the first place.

Costs and admin

Running a company adds ongoing cost and administration that a personal buy-to-let does not have:

• Annual accounts and a corporation tax return, usually prepared by an accountant, at a cost that is generally higher than a personal Self Assessment return.
• Confirmation statement and company filings with Companies House each year.
• Separate business banking, since company and personal funds must be kept apart.
• The cost of extracting profit, whether through payroll administration for salary or the tax on dividends.

None of this is prohibitive for a landlord with several properties, but it is a real recurring cost that should be included in any comparison, not an afterthought once the decision has already been made on tax grounds alone. As a rough guide, accountancy fees for a simple property SPV typically run a few hundred pounds a year higher than a personal Self Assessment return, which is a modest cost against the tax saving for a leveraged, higher rate portfolio, but a more meaningful drag for a single lightly geared property.

There is also a Stamp Duty Land Tax point specific to companies that catches some landlords out. A company pays the standard residential rates plus a 5% surcharge on every purchase, with no first-home exemption, because a company has no main residence to claim one against. If a single dwelling costs more than £500,000, a company can also face a flat 17% rate on the whole price unless it qualifies for a relief, such as the relief available to genuine property rental or development businesses. This makes the upfront cost of buying through a company noticeably higher than buying personally for anything above that threshold, and it is worth pricing in before you commit to the structure for a higher-value purchase.

When to take advice

Two situations deserve particular caution. The first is transferring a property you already own personally into a company. This is normally treated as a sale for both Stamp Duty Land Tax and Capital Gains Tax purposes, even though you are simply moving the property to an entity you control, which can create a substantial tax bill upfront before any ongoing saving begins. Our transferring property to a limited company guide covers this in more depth.

The second is a portfolio that mixes several properties, several owners, or plans to sell within a few years. The interaction between Section 24, corporation tax, extraction tax, mortgage cost, and Stamp Duty Land Tax on any transfer is genuinely complex, and small differences in your circumstances, such as whether you need to draw income out now or can reinvest it, change the right answer. Model the actual numbers for your situation with an accountant who works with property investors before committing, particularly before restructuring anything you already own.

A useful rule of thumb, though not a substitute for that modelling, is that incorporation tends to suit higher rate taxpayers buying new, leveraged property who can leave most of the profit inside the company for now. It tends to suit basic rate taxpayers, single lightly geared properties, and landlords who need to draw the income out personally each year rather less. Most real portfolios sit somewhere between those two extremes, which is exactly why a general guide can point you toward the right questions but cannot give you the answer.

How Property HQ helps

Property HQ tracks properties, mortgages and cashflow across both personal and limited company structures in one workspace, so if you are running a mixed portfolio or considering a change of structure, you can see the real numbers per property rather than working from a spreadsheet estimate.

Disclaimer

This guide is general information for UK landlords, not legal, tax or mortgage advice. Check GOV.UK, HMRC or a qualified adviser for your situation.