“Should I Put My Rental Property in a Limited Company?

If you’re a landlord paying 40% tax and watching half your rental profit disappear, you’ve probably wondered: should I put my properties in a limited company?

The answer isn’t simple, but it might save you thousands – or cost you tens of thousands if you get it wrong. Let me explain exactly when it makes sense and when it doesn’t.

Quick Decision Guide

Limited company likely makes sense if:

• You’re a 40%+ taxpayer

• Building a portfolio (3+ properties)

• Buying NEW properties (not transferring existing)

• Want to retain profits for growth

Probably not worth it if:

• You’re a basic rate taxpayer

• Own 1-2 properties personally already

• Need to extract all income to live

• Considering transferring existing properties

What Changed? The Section 24 Problem

Before April 2020, landlords could deduct all their mortgage interest from their rental income before paying tax. Simple.

Then the government introduced Section 24, which fundamentally changed the game for higher-rate taxpayers.

Now you can’t deduct mortgage interest as an expense. Instead, you get a 20% tax credit.

Why this matters:

If you’re a 40% taxpayer with £10,000 in mortgage interest:

• Old system: Saved you £4,000 in tax (40% of £10,000)

• New system: Saves you £2,000 in tax (20% tax credit)

• You lose: £2,000 every year

For additional rate taxpayers (45%), it’s even worse.

This is why limited companies became attractive – companies can still deduct mortgage interest as a business expense.

How Limited Companies Are Different

The good news:

• Full mortgage interest relief – deduct it all as a business expense

• Corporation tax can be lower – 19% for profits under £50,000, 25% for profits over £250,000 vs 40-45% income tax

• Flexibility on income – take salary and/or dividends when tax-efficient

• Inheritance planning – easier to pass shares to family

• Credibility – looks more professional to lenders and tenants

The not-so-good news:

• More complexity – annual accounts, corporation tax returns, more admin

• Higher accounting fees – typically £850-2,000 plus VAT/year vs £500-750 plus VAT for personal

• Mortgage rates – Company buy-to-let mortgage rates are often higher than equivalent personal rates, although the difference varies between lenders and market conditions

• Getting money out costs tax – dividend tax (33.75% for higher rate taxpayers) when you extract profits

• SDLT surcharge – 5% stamp duty surcharge on additional properties (increased from 3% in October 2024)SDLT – Standard residential SDLT rates plus the higher rates for additional dwellings. A separate 15% SDLT regime can apply to certain company purchases of residential property over £500,000, although relief is commonly available for genuine property rental businesses.

• Less flexibility – can’t just spend the money, it’s the company’s not yours

• Making Tax Digital (MTD) – from April 2026 onwards, landlords with rental income over certain thresholds must use MTD-compatible software and submit quarterly updates (additional accounting costs typically £900-1,200 plus VAT/year)

Personal vs Company: The Comparison

Factor	Personal Ownership	Limited Company
Mortgage interest relief	20% tax credit only	Full deduction
Tax rate	20-45% income tax	19-25% corporation tax*
Getting money out	Direct access	Dividend tax (33.75%)
Mortgage rates	Lower (typical)	0.5-1% higher
Admin burden	Low (increasing with MTD)	Higher
Accounting fees	£500-750 plus VAT/year**	£850-2,000 plus VAT/year
SDLT surcharge	5% on additional properties	5% on additional properties – Standard residential SDLT rates plus the higher rates for additional dwellings. A separate 15% SDLT regime can apply to certain company purchases of residential property over £500,000, although relief is commonly available for genuine property rental businesses.

*19% for profits up to £50,000, marginal relief between £50,000-£250,000, 25% over £250,000

**Plus £900-1,200 plus VAT/year for MTD compliance if applicable

The Maths: A Real Scenario

Sarah, an IT contractor paying 40% tax, owns a rental property in Manchester. Here’s her situation:

• Rental income: £15,000/year

• Mortgage interest: £8,000/year

• Other expenses: £2,000/year

As a personal landlord:

Rental income: £15,000

Deduct other expenses: -£2,000

Taxable profit: £13,000

Tax at 40%: £5,200

Less 20% tax credit on mortgage interest: -£1,600

Total tax paid: £3,600

In a limited company (assuming profits under £50,000):

Rental income: £15,000

Deduct mortgage interest: -£8,000

Deduct other expenses: -£2,000

Taxable profit: £5,000

Corporation tax at 19%: £950

Profit after corporation tax: £4,050

She then extracts the profit as dividend:

Dividend: £4,050

Less dividend allowance: -£500

Taxable dividend: £3,550

Dividend tax at 33.75%: £1,198

Total tax paid: £2,148 (corp tax + dividend tax)

Under these assumptions Sarah would be £1,452 better off using a limited company, even when extracting all the profit. If Sarah left the money in the company she would save even more tax, although she would want to extract it at some point.

This shows that for higher-rate taxpayers, limited companies save significant tax whether reinvesting or extracting.

Important note: If Sarah’s total company profits exceed £50,000, the corporation tax rate increases to 25% (with marginal relief between £50,000-£250,000). This changes the calculation – always run the numbers based on your actual profit levels.

When a Company Really Makes Sense

Portfolio Builders: Your Best Use Case

You’re buying properties regularly and reinvesting profits. You don’t need to extract all the income to live on. The corporation tax savings compound as you grow. The difference between 19-25% corporation tax and 40-45% income tax becomes significant at scale.

Higher Rate Taxpayers: Where the Maths Works

The bigger the gap between your personal tax rate (40-45%) and corporation tax (19-25%), the more you save. As Sarah’s example shows, even when extracting all profits, higher-rate taxpayers save significantly. Basic rate taxpayers (20%) see minimal benefit – the admin and costs often outweigh savings.

Starting Fresh: Buy New, Don’t Transfer

It’s much easier to buy new properties in a company than transfer existing ones. Transfer costs (stamp duty, CGT, legal fees) usually kill the numbers completely.

Future Planning: Succession Made Easier

If you’re thinking about passing properties to children eventually, shares in a company are easier to transfer than properties. More tax-efficient inheritance planning options.

When a Company Doesn’t Make Sense

You Already Own Properties Personally

Transferring existing properties into a company triggers:

• Stamp duty: 5% of property value (increased from 3% in October 2024)

• Capital gains tax: Up to 24% of gain (increased from 20% in October 2024)

• Legal fees: £1,000-2,000 per property

• Mortgage fees: Redemption + arrangement fees

Real example:

Property worth £300,000, bought for £200,000 (£100,000 gain)

• Stamp duty (5%): £15,000

• Capital gains tax: £24,000 (at 24% rate)

• Legal/mortgage fees: £3,000

• Total cost: £42,000

How many years of tax savings to recoup £42,000? Usually 15+ years, if ever.

Better approach: Leave existing properties in your name, buy new ones in a company.

You’re a Basic Rate Taxpayer

Section 24 doesn’t hit you as hard. The admin burden, higher accounting fees, and potentially higher mortgage rates might cost more than you save in tax.

You Only Own One Property

Unless it’s a high-value property with a substantial mortgage, the hassle and ongoing costs might not justify the tax saving.

If you’re buying residential property through a company, you should also be aware of the separate Annual Tax on Enveloped Dwellings (ATED) rules. Although many landlords qualify for relief, annual reporting may still be required

A little known Property Requirement – Additional Tax On Enveloped Dwellings

The Mortgage Rate Problem

Company buy-to-let mortgages typically have:

• Interest rates 0.5-1% higher than personal BTL

• Larger deposit requirements (25-40% vs 25%)

• Fewer lenders to choose from

Why? Lenders view companies as higher risk, even if you’re the sole director guaranteeing the loan.

Example impact: £200,000 mortgage at 1% higher interest = £2,000/year extra cost

You need to factor this into your tax calculations. Sometimes the higher mortgage cost wipes out the tax saving entirely.

What About Holiday Lets?

Important change from 6 April 2025: The Furnished Holiday Letting (FHL) tax regime has been abolished.

Holiday let owners now face the same Section 24 restrictions as residential landlords:

• Can only claim 20% tax credit on mortgage interest (not full deduction)

• Lost capital allowances on furniture and equipment

• No longer treated as trading income

If you run holiday lets, the limited company structure has become significantly more attractive since this change.

Making Tax Digital (MTD) – What You Need to Know

From April 2026, Making Tax Digital for Income Tax is being phased in for landlords. This narrows the administrative difference between personal and company ownership.

The rollout timeline:

• From 6 April 2026: Landlords with gross income over £50,000 in the 2024/25 tax year

• From 6 April 2027: Those with income over £30,000 in the 2025/26 tax year

• From 6 April 2028: Those with income over £20,000 in the 2026/27 tax year

Important: This is your gross rental income (total income before expenses), not your profit. If you jointly own properties, each owner’s share counts towards their individual threshold.

What MTD requires:

• Use MTD-compatible software to track all rental income and expenses throughout the year

• Submit quarterly updates to HMRC (summaries of income and expenses approximately every three months)

• File an end-of-year declaration by 31 January, confirming all income sources and claiming any tax reliefs

• Keep digital records – no more shoeboxes of receipts

What this means in practice:

• Set up a dedicated bank account for rental transactions

• Choose and pay for MTD-compatible software (HMRC won’t provide it)

• More frequent interaction with your accountant or more DIY work

• Additional accounting costs typically £900-1,200 plus VAT/year if using an accountant

Why this matters for the company vs personal decision:

If you’re earning £50,000+ in gross rental income, you’re already facing MTD compliance from April 2026. This adds complexity and cost to personal ownership that didn’t exist before. Limited companies already have similar digital filing requirements, so the gap in admin burden narrows.

For landlords just above the £50,000 threshold, MTD compliance costs might tip the balance toward incorporation – especially if you’re a higher-rate taxpayer anyway.

Other Structures Explained

SPV (Special Purpose Vehicle): Just a limited company set up for a specific property or portfolio. Same tax treatment as any limited company – the fancy name doesn’t change anything.

Partnership: Can work if investing with a spouse or partner. Allows income splitting between you, but doesn’t give you the corporation tax benefits of a limited company.

Trust: Complex, expensive to set up, requires ongoing professional management. Rarely worth it for straightforward buy-to-let portfolios.

For most landlords, it’s either personal ownership or a standard limited company. Keep it simple.

The Admin Reality

Here’s what limited company ownership actually involves:

Ongoing requirements:

• Company bank account (separate from personal)

• Annual accounts prepared by accountant

• Corporation tax return filed

• Confirmation statement to Companies House

• Proper record-keeping and receipts

• Director responsibilities and compliance

What this means:

• Higher accounting fees (£850-2,000 plus VAT/year vs £500-750 plus VAT for personal)

• More paperwork throughout the year

• Can’t just mix personal and business money

• More formal structure even if it’s just you

If you hate admin and paperwork, this might genuinely be the deciding factor against a company structure.

What Successful Landlords Actually Do

Portfolio landlords (5+ properties, actively growing): Nearly all use limited companies for new purchases. According to Hamptons, over 400,000 buy-to-let companies existed by early 2025 – up 332% since 2016 when Section 24 started phasing in.

Accidental landlords (1-2 properties, kept old house when they moved): Usually stay personal. The admin burden isn’t worth it for one or two properties.

Professional landlords (3-4 properties, treating it like a business): Mixed approach. Often depends on personal tax rate, growth plans, and whether they need the income. With MTD coming in, more are considering incorporation.

What You Should Actually Do

Step 1: Run Your Real Numbers

Get an accountant who specializes in property to model both scenarios using your actual figures:

• Your current rental income and expenses

• Your mortgage costs (and company mortgage rates you could actually get)

• Your personal tax rate

• Your total property profit levels (affects whether you pay 19% or 25% corporation tax)

• How much profit you need to extract vs reinvest

• Your growth plans

• Whether you’ll be caught by MTD and when

• Impact of MTD compliance costs (£900-1,200 plus VAT/year)

Generic advice doesn’t cut it – your situation is unique.

Step 2: Think Long-Term

Are you building a portfolio or just managing what you have? Growing or winding down? Buying or selling? Timeline matters significantly.

Five-year view: Planning to buy 3-4 more properties? Company probably makes sense.

Winding down: Selling properties over next few years? Personal ownership is simpler.

Step 3: Don’t Transfer Existing Properties

Unless you’ve got a very specific situation (like you’re about to hit additional rate tax and have huge mortgages), the transfer costs don’t stack up mathematically.

Use a company for new purchases if the numbers work. Leave existing ones alone.

Step 4: Factor in the Faff

Be honest about your tolerance for admin and complexity. Limited company ownership means:

• Regular interaction with Companies House

• Proper bookkeeping (can’t just use a spreadsheet)

• More accountant involvement throughout the year

• Formal structure even when it’s just you

But remember: if you’re earning £50,000+ in rental income, you’re facing quarterly MTD submissions from April 2026 anyway. The admin gap between personal and company ownership is narrowing.

The Bottom Line

A limited company can save higher-rate taxpayer landlords significant tax – whether they’re reinvesting profits to grow a portfolio or extracting them to live on. Sarah’s example showed £1,452 annual saving even when taking all the profit out.

It’s rarely worth it for existing properties (transfer costs are brutal), for basic rate taxpayers, or where additional accounting and mortgage costs outweigh the tax benefits.

The decision depends on:

• Your personal tax rate

• Your total property profits (affects 19% vs 25% corporation tax rate)

• Whether you’re buying or just holding

• Mortgage costs (company rates vs personal rates)

• How much income you need to extract

• Your growth plans over 5-10 years

• Your tolerance for admin and complexity

• Whether you’re caught by MTD (£50,000+ gross income from April 2026)

• Impact of MTD compliance costs

There’s no one-size-fits-all answer, which is annoying but true.

Get proper advice based on your actual situation. Property tax planning is nuanced – a good property accountant can model your specific numbers and show you exactly what makes sense.

And whatever you do, don’t transfer existing properties into a company without professional tax advice first. That mistake can cost you tens of thousands in unnecessary tax and fees.

Many people compare 19% corporation tax with 40% income tax. That’s misleading because if you eventually extract the profits personally there is usually a second layer of tax. The real advantage often comes from the ability to defer personal tax while growing the portfolio, not simply from paying corporation tax instead of income tax.

Frequently Asked Questions

Can I transfer my existing rental property into a limited company?

Technically yes, but it triggers stamp duty (5% of property value since October 2024), capital gains tax (up to 24% of gain), and legal fees. These costs usually take 15+ years to recoup through tax savings – if ever. Better to keep existing properties personal and buy new ones in a company if the structure makes sense.

What’s the best tax structure for property investors in 2025/26?

Depends on your tax rate, portfolio size, and growth plans. Higher-rate taxpayers (40-45%) typically benefit from limited companies for new purchases – saving around £1,400+ per property annually even when extracting profits. Basic-rate taxpayers with 1-2 properties usually don’t save enough to justify the extra complexity and costs. With MTD coming in from April 2026, landlords earning £50,000+ gross rental income face additional compliance costs that narrow the admin gap between personal and company ownership.

Are limited company buy-to-let mortgages more expensive?

Yes, typically 0.5-1% higher interest rates and require larger deposits (often 30-40% vs 25% for personal). Fewer lenders offer them too. You must factor this extra cost into your tax savings calculation – sometimes it significantly reduces the benefit.

Should I use an SPV for property investment?

An SPV (Special Purpose Vehicle) is just a limited company set up for specific properties. The tax treatment is identical to any limited company – the name doesn’t change anything. Don’t let jargon confuse you.

How much more do company accounts cost than personal tax returns?

Limited company accounting typically costs £850-2,000 plus VAT/year vs £500-750 plus VAT for personal landlord tax returns. If you’re subject to Making Tax Digital from April 2026 onwards, add another £900-1,200 plus VAT/year for MTD compliance. You’re paying for annual accounts, corporation tax returns, and more complex compliance. Factor these ongoing costs into your decision.

What’s the corporation tax rate for rental companies in 2025/26?

For the 2025/26 tax year: 19% on profits up to £50,000, marginal relief between £50,000-£250,000, and 25% on profits over £250,000. If you have associated companies, these thresholds are divided by the number of companies. Make sure to calculate based on your total property portfolio profits.

What happened to the Furnished Holiday Letting tax benefits?

From 6 April 2025, the FHL regime was abolished. Holiday lets now face the same Section 24 mortgage interest restrictions as regular residential properties – you only get a 20% tax credit, not full deduction. This makes limited company structures more attractive for holiday let owners.

What is Making Tax Digital and when does it affect me?

Making Tax Digital for Income Tax affects landlords based on their gross rental income (before expenses):

• From 6 April 2026: Landlords with income over £50,000 in 2024/25

• From 6 April 2027: Those with income over £30,000 in 2025/26

• From 6 April 2028: Those with income over £20,000 in 2026/27

You’ll need to use MTD-compatible software, submit quarterly updates to HMRC, and file end-of-year declarations. This typically adds £900-1,200 plus VAT/year to accounting costs. If you jointly own properties, each owner’s share counts towards their individual threshold. Limited companies already have digital filing requirements, so MTD doesn’t add extra burden for company structures.

Does MTD make limited companies more attractive?

If you’re earning £50,000+ in gross rental income, you’ll face MTD compliance from April 2026 regardless of structure. This means quarterly submissions, digital record-keeping, and additional costs whether you’re personal or limited company. Since companies already operate with similar requirements, MTD narrows the admin gap between the two structures – potentially making incorporation more attractive for larger landlords who are higher-rate taxpayers.

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Need help with the numbers? Property tax is what we do. We can model your specific situation – personal vs company, transfer costs, corporation tax rates at your profit level, MTD compliance impacts and timing, long-term projections – and give you a straight answer based on your actual figures, not generic advice