More landlords than ever are buying their rental properties through limited companies rather than in their own names. For some, it’s a smart, tax-efficient way to grow a portfolio. For others, it adds cost and admin for little benefit.
So how do you know which route is right for you? Let’s break down what “buying through a limited company” actually means, how the tax rules differ, and when each approach makes financial sense.
Key Takeaways
- If you’re a higher-rate taxpayer or building a portfolio, using a limited company can leave you with more profit to reinvest.
- If you’re a basic-rate taxpayer or just want one or two rentals, personal ownership is usually simpler and cheaper.
- Company mortgages are often slightly pricier, but you can deduct your full mortgage interest before paying tax.
- Don’t transfer existing properties into a company without advice – it can trigger stamp duty and capital gains tax.
What “Buying Through a Limited Company” Really Means
When you buy a property in your own name, you personally own it, and you pay income tax on the rent it earns.
With a limited company buy-to-let, the property is owned by a company you control. That company pays corporation tax on its profits.
You’ll need to get a specific mortgage type that’s designed for limited companies, typically a limited company buy to let mortgage.
While you can have a standard trading company, which can be used for multiple purposes, some landlords set up what’s called a Special Purpose Vehicle (SPV). This a simple company created purely to buy, own and manage property.
Why So Many Landlords Have Switched
In 2016, the government rolled out Section 24 which restricted how landlords could claim mortgage interest relief.
Before Section 24, landlords could deduct mortgage interest from rental income before paying tax, so you were taxed only on your real profit.
Now, you can’t fully deduct those costs if you own property personally. You pay tax on your entire rental income (regardless of mortgage interest costs), then get a 20% credit to offset some of the interest.
Because of the 20% tax offset, the change isn’t drastic for basic-rate taxpayers. But for those in the 40% or 45% bands, it can mean paying tax on money that actually goes straight to the lender.
Limited companies are treated differently: they can deduct all business expenses, including mortgage interest, before paying corporation tax (19%–25%).
That single difference has driven a surge in landlords incorporating.
Personal vs Company Ownership: The Key Differences
| In Your Own Name | Through a Limited Company | |
|---|---|---|
| Who owns the property | You personally | The company |
| What tax applies | Income tax (20%–45%) | Corporation tax (19%–25%) |
| Can you deduct mortgage | Only 20% tax credit | Fully deductible |
| Mortgage rates | Usually cheaper | Usually higher |
| Paperwork | Self-assessment return | Full company accounts + CT600 |
| Best for | Small-scale or casual landlords | Growing a portfolio, reinvesting profits |
How the Tax Actually Works
If you own property personally:
- You pay income tax on rental profit.
- You can no longer fully deduct mortgage interest – you only get a 20% credit.
- For higher-rate taxpayers, that effectively means paying tax on turnover, not profit.
If your company owns the property:
- The company deducts all its costs (mortgage, maintenance, letting fees, etc.) before paying corporation tax.
- You only pay personal tax when you draw money out as salary or dividends.
- If you reinvest profits, no extra tax applies until later.
What That Looks Like In Practice
Let’s say you’re a higher-rate taxpayer and your rental property brings in £18,000 per year…
| In Your Own Name | Through a Limited Company | |
|---|---|---|
| Rent | £18,000 | £18,000 |
| Mortgage interest | £11,000 | £11,000 |
| Taxable profit | £18,000 (interest not deductible) | £7,000 (after mortgage interest deduction) |
| Tax due | ~£5,000 (40% income tax minus 20% credit) | ~£1,330 (19% corporation tax) |
| Cash left after tax | £2,000 | £5,670 (before dividends) |
If you take the full £5,670 out of the company as dividends, you’ll pay 33.75% dividend tax (for higher-rate taxpayers), leaving about £3,755.
Still, that’s nearly £1,800 more in your pocket than owning it personally – and if you leave the money in the company to reinvest, you keep the full £5,670 to grow the business.
What It Costs – Rates, Fees and Paperwork
Company buy-to-lets aren’t dramatically more expensive, but costs add up:
- Rates: Typically 0.5–1% higher than personal BTLs.
- Product fees: £1,000–£3,000, or sometimes 1–2% of the loan.
- Legal: You’ll usually give a personal guarantee and may need separate legal advice.
- Accounting: £400–£800 per year for basic accounts (more for complex portfolios).
- Admin: Annual filings to Companies House and HMRC.
Should You Move Existing Properties Into a Company?
Usually no – at least not without specialist advice.
Selling your old property to your own company counts as a real sale in HMRC’s eyes.
That can trigger:
- Capital Gains Tax on your personal sale, and
- Stamp Duty Land Tax (plus the 3% surcharge) for the company purchase.
Together, those costs often wipe out any tax advantage. Many landlords keep existing properties in their own names and buy new ones through their company instead.
When Each Option Makes the Most Sense
Owning personally works best if:
- You’re a basic-rate taxpayer.
- You have one or two rentals and use the income personally.
- You prefer simplicity over admin.
Owning through a company works best if:
- You’re a higher-rate taxpayer.
- You plan to build or refinance a portfolio.
- You’ll reinvest profits rather than draw them out.
You want to ring-fence liability and keep finances separate.
The Reinvestment Advantage
One major upside of a company structure is flexibility. Because the company pays corporation tax on its profits, not you personally, it can keep what’s left inside the business to fund:
- New deposits
- Refurbishments
- Maintenance or upgrades
That’s how portfolio landlords scale faster. Instead of losing 40% of profit to income tax each year, they keep more inside the business, compounding growth over time.
Longer-Term Considerations
Inheritance planning:
A limited company may make it easier to involve family members or transfer ownership, and can reduce inheritance tax – but this needs specialist tax advice.
Selling in future:
If the company sells a property, it pays corporation tax on the gain. You’ll then pay dividend tax if you withdraw the proceeds. For long-term investors, the ability to reinvest within the company often outweighs that drawback.
Transparency:
Company details, including directors and filings, are public via Companies House. That’s rarely a deal-breaker but worth knowing.
How to Set Up a Limited Company
If you decide to buy through a company:
- Get tax advice first – a 30-minute chat can prevent expensive mistakes.
- Register a company with Companies House. Most SPVs use SIC 68209 (“Letting and operating of own or leased real estate”).
- Open a business bank account and keep finances separate.
- Apply for a limited-company mortgage – lenders will need company and director details, plus personal guarantees.
- Hire an accountant to manage annual filings and guide you on dividends and director loans. You don’t have to do this, but it can pay off to have a professional manage your accounts.
Final Thoughts
Limited-company buy-to-lets aren’t just for big investors anymore – they’ve become a mainstream tool for landlords who think long-term.
But there’s no one-size-fits-all answer. The right approach depends on your income, tax band, and plans for the future.
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