Buying property through a limited company is the right default for most people building a portfolio with a mortgage. That is a stronger claim than most guides make, and this one defends it. Two rule changes have widened the gap again. Dividend tax rose on 6 April 2026, and from 6 April 2027 property income gets its own rates. The expensive mistake is rarely the structure you pick. It is picking your own name and finding out later.
Buy through a limited company if you are borrowing and holding for the long term. The company deducts mortgage interest in full and pays 19% corporation tax on small profits, while a higher rate landlord loses 40%. Owning in your own name suits a short hold, an unmortgaged flat, or someone who needs the rent to live on now. Switching later costs capital gains tax, stamp duty and a new mortgage.
What's New in 2026 for Landlord Tax
Three dated changes matter to this decision.
Dividend tax rose on 6 April 2026. After the £500 dividend allowance, the rates are 10.75% basic, 35.75% higher and 39.35% additional. Any comparison built on the old 8.75% and 33.75% rates understates the cost of drawing profit out.
Making Tax Digital for Income Tax started in April 2026 for individuals with qualifying income over £50,000. Qualifying income is gross rent, not profit, so a landlord with three flats can be caught while barely breaking even. The threshold falls to £30,000 in April 2027. Companies file corporation tax returns and sit outside it, which pushes more buy-to-let purchases into a limited company.
From 6 April 2027, property income and savings income leave the main income tax rates behind. They move to 22%, 42% and 47%. The company rate on that same rental income does not change.
Key Takeaways
- A company deducts mortgage interest in full. As an individual you get only a 20% basic rate tax credit, so you can owe tax on profit you never banked.
- Corporation tax is 19% on profits up to £50,000 and 25% above £250,000, with an effective marginal rate of about 26.5% in between.
- Those £50,000 and £250,000 limits are divided by the number of associated companies plus one. Four companies drops your small profits limit to £12,500.
- Dividend tax rose on 6 April 2026 to 10.75% basic, 35.75% higher and 39.35% additional, after a £500 dividend allowance.
- The 5% SDLT surcharge applies to an investment purchase either way, so it is not a cost of using a company if you already own a home.
- Undoing personal ownership later means a capital gains bill at 18% or 24%, SDLT for the company and a new mortgage.
What Buying Property Through a Limited Company Really Involves
A limited company is a separate legal person. It buys the flat, collects the rental income, pays the mortgage and pays its own tax. You own shares, not bricks.
Most landlords use a special purpose vehicle, or SPV: an ordinary limited company that holds property and does nothing else. It is registered at Companies House under SIC code 68100 or 68209.
That separation is where limited liability comes from. Your risk is normally capped at what you put in. A lender will want a personal guarantee from each director, which hands some of that protection back, so treat limited liability as a real but partial shield.
If you pay 40% tax on your rent, Section 24 is why you are here
Section 24 of the Finance Act 2015 removed mortgage interest as a deductible cost for individual landlords. Critics called it the tenant tax. You get a 20% basic rate credit instead, under the interest restriction for residential landlords.
On a heavily mortgaged flat, a higher rate taxpayer can face a tax bill bigger than the rental income the flat actually produced. A company treats mortgage interest as a normal business cost. That single difference drives most incorporations.
Why a Limited Company Is the Right Default, Not a Coin Toss
Most guides end on "it depends". That is a dodge. The company wins on any long hold with borrowing, and owning in your own name is the narrow case.
Getting it wrong is cheap to fix one way and dear the other
Buy in a company and later wish you had not, and you have an awkward but survivable problem. Buy in your own name and later want the company, and you face a full sale at market value.
That means capital gains tax, or CGT, at 18% or 24% on your gain, SDLT for the company on the market price, and a new mortgage on company terms. Three costs, one decision. This asymmetry is the argument almost nobody makes, and it is the one that matters most.
Your tax band is not fixed, and the flat cannot follow you
A basic rate taxpayer today is not a basic rate taxpayer for life. A pay rise, a partner's income, or the rent itself can push you over £50,270. Income tax thresholds are frozen until April 2031, so wage growth alone drags people upward.
Most landlords hold for a decade or more. The odds that your marginal rate stays put that long are poor. On the day it changes, the flat cannot move with it, because moving it costs the three items above.
This cuts your way too. A company that suits you at 40% still works if your income later falls. The structure is flexible; your tax band is not.
The narrow cases where owning in your own name wins
Three situations genuinely favour your own name. Stated once, without hedging:
- You need the rent as income now. Drawing everything out adds a second layer of dividend tax, and that eats the saving.
- There is no mortgage. The interest restriction is irrelevant with no interest to restrict, so the main driver disappears.
- You expect to sell within a few years. The £3,000 annual exempt amount and the 18% and 24% rates can beat a company sale.
Outside those three, a portfolio builder should start from the company and be argued out of it.
Corporation Tax Is Not a Flat Rate, and Extra Companies Shrink Your Bands
The "19% instead of 40%" pitch is only true at the bottom of the scale. Here is what a limited company actually pays on its profits:
| Company profits for the year | What the company actually pays |
|---|---|
| Up to £50,000 | 19% small profits rate |
| £50,001 to £250,000 | 25% less marginal relief, about 26.5% on each extra pound |
| Over £250,000 | 25% main rate |
- Up to £50,000: 19%, the small profits rate.
- £50,001 to £250,000: 25% less marginal relief, about 26.5% on each extra pound.
- Over £250,000: 25%, the main rate.
Marginal relief runs on a fraction of 3/200, which produces that 26.5% effective rate. A portfolio making £120,000 of profit is not paying 19%.
If you own more than one company, your £50,000 threshold shrinks
The £50,000 and £250,000 limits are divided by the number of associated companies plus one. Run four and each one gets only £12,500 of profit at 19% before marginal relief bites.
Associated does not just mean companies you own outright. Control held by people connected to you can pull a company into the count, so get it tested before you incorporate.
Taking the Profit Out: Dividend Rates Went Up on 6 April 2026
Money inside the company is not your money, and getting it out costs a second layer of tax. After a £500 allowance, dividends are taxed at 10.75% for basic rate taxpayers, 35.75% for higher rate and 39.35% for additional rate. There is no National Insurance on dividend income, and a small director's salary can come out too.
Spend the rent and those two layers claw back much of the corporation tax saving. Leave the profit in, roll it into the next deposit, and you pay only 19% before reinvesting. The structure suits portfolio builders rather than landlords living off the yield.
Worked Example: Priya's Second Flat, Personal Ownership Against a Company
Priya is a pharmacist on an £80,000 salary, so every pound of rental profit lands in the 40% band. She is buying a £250,000 flat with a 25% deposit. The £187,500 mortgage costs 5.6%, giving £10,500 of interest a year. Rent is £14,400 and running costs are £2,400.
| The sum | Owned personally | Owned by a company |
|---|---|---|
| Taxable profit | £12,000 | £1,500 |
| Tax on that profit | £4,800 at 40% | £285 at 19% |
| Section 24 basic rate credit | £2,100 | not needed |
| Tax to pay | £2,700 | £285 |
| Cash profit before tax | £1,500 | £1,500 |
| Cash left afterwards | minus £1,200 | £1,215 |
- Taxable profit: £12,000 in her own name, £1,500 in the company.
- Tax on that profit: £4,800 at 40%, against £285 at 19%.
- Section 24 basic rate credit: £2,100 in her own name, not needed in the company.
- Tax to pay: £2,700 against £285.
- Cash profit before tax: £1,500 on both routes.
- Cash left afterwards: minus £1,200 against £1,215.
That £2,700 bill on £1,500 of real cash profit leaves Priya £1,200 out of pocket. The company keeps £1,215.
Draw that £1,215 out and the first £500 is free. The remaining £715 is taxed at 35.75%, costing £255.61, so she nets £959. Against minus £1,200 in her own name, that is a swing of roughly £2,159 a year on one flat, before your accountant's fee.
These figures are illustrative, not a promise. Change the mortgage rate, the rent or Priya's salary and the answer can move.
Want this comparison run properly on your own position? Book a free consultation through the contact form. We will explain how we would approach it and agree a fixed fee before any work starts.
Worked Example: Tom Is a Basic Rate Taxpayer Today and a Higher Rate One Later
Tom earns £36,000 and buys his first buy-to-let. Rent is £12,000, running costs are £2,000, and mortgage interest is £7,000. His cash profit is £3,000.
In his own name today, his taxable property profit is £10,000, taxed at 20%, which is £2,000. The Section 24 credit is £1,400, so he pays £600 and keeps £2,400. Inside a company the taxable profit is £3,000, tax at 19% is £570, and £2,430 stays put. Drawing it all out would leave him about £2,222. On today's income his own name wins by roughly £180.
Five years on, Tom is promoted to £60,000. Nothing about the flat changes, but the tax does. The same £10,000 is now taxed at 40%, which is £4,000, less the same £1,400 credit. He pays £2,600 out of £3,000 of cash and keeps £400. The company still pays £570 and still keeps £2,430.
That is a swing of about £2,030 a year, on the same flat, from one promotion. From 6 April 2027 the personal slice is taxed at 42% instead of 40%, which widens it again. Tom cannot move the flat into a company without triggering a CGT charge, SDLT and a new mortgage, so he pays the higher bill every year he holds it.
Stamp Duty Land Tax Is Not a Reason to Avoid a Limited Company
Most guides list SDLT as a drawback of the company route. That is wrong, and correcting it matters.
The 5% additional dwellings surcharge attaches to the purchase, not to the buyer's legal form. It applies to an investment property whether you buy in your own name or through a company. For anyone who already owns a home, the stamp duty land tax bill is identical either way. The rates by slice run 5%, 7%, 10%, 15% and 17%.
Only two points are genuinely company-specific:
- The 17% flat rate. A single dwelling bought for more than £500,000 by a company can be charged 17% on the whole price. That rate is disapplied where the property sits in a genuine rental business, which covers most SPV purchases, and the investor rates apply instead.
- The buyer who owns nothing else. Someone with no other property would pay standard home-mover rates in their own name but the surcharge through a company. That case is real, and it is narrow.
SDLT covers England and Northern Ireland. Scotland and Wales charge their own property transaction taxes at their own rates, so check those separately before you budget a purchase there.
From 6 April 2027, Property Income Gets Its Own Rates of 22%, 42% and 47%
From 6 April 2027, property income and savings income get a separate set of rates: 22%, 42% and 47%. Each sits two points above the equivalent income tax rate of 20%, 40% and 45%.
The effect is a wider gap. A higher rate landlord holding in their own name moves from 40% to 42%. The company rate on the same rental income stays at 19% up to the small profits limit. Priya's personal bill rises while the company's does not.
(To verify: the size of that increase depends on whether the finance-cost credit tracks the new 22% basic property rate or stays at 20%. The published rate card does not say, so we have deliberately not quoted a figure.)
Selling, Living In It and Passing It On
If you sell, the company pays corporation tax on the gain with no annual exempt amount
Individuals pay capital gains tax on residential property at 18% or 24%, after a £3,000 annual exempt amount, and report it within 60 days of completion. A company gets neither the exemption nor the 18% band. Its gain joins its profits, so a small gain can cost 19% instead of 24%, while a large one pays 25%.
If you already own the flat, Section 162 incorporation relief has a high bar
Moving a property you own into your company is a sale at market value. Section 162 incorporation relief can defer that CGT charge, but only where you transfer a genuine business as a going concern, with all its assets. A handful of passively held flats rarely qualifies. Assume you will not get it until a specialist confirms you will.
If you want to live in the property, the company is the wrong owner
You can buy a house through a limited company and live in it, and it usually goes badly. Occupying a company property as a director creates a taxable benefit in kind charged on you personally, plus employer National Insurance at 15% for the company.
The annual tax on enveloped dwellings can apply too. ATED is an annual charge on residential property held by a company, with relief where the home is genuinely let to third parties. You also lose private residence relief, so buy your own home in your own name.
If inheritance tax is the driver, shares are easier to give away than bricks
Advice here is full of overclaiming, so here is the honest position. Investment property companies do not qualify for Business Property Relief. A company does not lift the flat out of the 40% charge above the £325,000 nil rate band.
What it gives you is divisible ownership. Shares can be gifted in slices, and growth shares can be arranged so future value builds in the next generation's hands. That reduces exposure to inheritance tax over time. It does not avoid it.
Group Structures for Landlords Running More Than One Company
This is where a corporate structure earns its running cost.
- Group relief. Where a qualifying group relationship exists, a loss in one company can go against profits in another, so a refurbishment year in one SPV cuts the bill in the next.
- Inter-company dividends. Payments between UK group companies are normally exempt, so cash can move from a mature SPV to fund the next deposit.
- Alphabet shares. Separate share classes let you vary payouts between family and partners, matching them to whoever has unused basic rate band.
- Preference shares. In a joint venture these give an investor a priority return without diluting your equity in the growth.
- Ring-fencing. Holding the best assets in a separate company keeps them clear of riskier developments and keeps each SPV clean for lenders.
Every company you add divides the £50,000 and £250,000 profit thresholds further. Five companies means £10,000 each at 19%, so a group has to earn that cost back.
What to Line Up Before You Offer, and What It Costs to Run
Registration is the easy part. Sequencing is what makes a purchase land smoothly.
- The SPV itself. Register a limited company at Companies House with SIC code 68100 or 68209 before you apply for finance. Lenders dislike companies that trade in anything else.
- A business bank account. Rent and mortgage payments must run through the company, never your own account. Opening a business bank account can take weeks, so start early.
- A mortgage broker who places company cases. Fewer lenders serve companies, pricing is dearer, and a 25% deposit plus a personal guarantee is a common starting point.
- A solicitor who has done company purchases. The SDLT return, the debenture and the guarantee all differ from a personal conveyance.
- An accountant, before you exchange. The associated companies test and the share structure are far cheaper to set up than to fix.
Running costs are real. The company files annual accounts and a confirmation statement at Companies House, a corporation tax return with HMRC, and you still file your own return for salary or dividends. A single low-yield flat rarely justifies that. A growing buy-to-let portfolio does.
Frequently Asked Questions About Buying Property Through a Limited Company
For a mortgaged buy-to-let you plan to hold for years, the company is usually the better structure, and it gets stronger every year your income rises. The exceptions are narrow: a short hold, no borrowing, or a landlord who needs the rent as income now. Run both sets of numbers before you offer.
Lenders set the deposit, not HMRC, and 25% of the purchase price is a common starting point for a company purchase. Expect fewer lenders, higher fees and a personal guarantee from every director. A clean SPV with the right SIC code makes underwriting easier, so speak to a mortgage broker early.
The 5% additional dwellings surcharge applies to an investment purchase either way, so for anyone who already owns a home the bill is the same in a company or in their own name. The company-only trap is the 17% flat rate on a single dwelling over £500,000, disapplied inside a genuine rental business.
There is no single answer, only the one that fits your income and your holding period. Borrowing to hold long term points hard at a company, because mortgage interest is fully deductible and retained profit pays 19%. Buying outright to spend the rent now points at your own name.
An SPV is a limited company. The label only means it exists for one purpose, normally holding rental property, and trades in nothing else. Most are ordinary private companies limited by shares, registered at Companies House under SIC code 68100 or 68209. Lenders prefer them because the accounts stay simple.
Profit gets taxed twice if you draw it out: corporation tax first, then dividend tax of up to 39.35%. Mortgages cost more and come from fewer lenders. There is no £3,000 annual exempt amount on gains and no private residence relief. Annual accounts and a company tax return add cost.
Verdict on Buying Property Through a Limited Company for Buy-to-Let
Buying property through a limited company is the right default for anyone taking on a mortgage and holding for the long term. It is not a coin toss. A limited company deducts mortgage interest in full, pays 19% on small profits, and lets you reinvest before the second layer of tax ever applies.
The clinching argument is not this year's saving. It is that your tax band will move and the flat cannot. A basic rate landlord who becomes a higher rate one is stuck with the worse answer, because undoing it costs capital gains tax, SDLT and a new mortgage.
Own it in your own name only if you need the rent to live on, there is no borrowing, or you plan to sell within a few years.
Book a free consultation through the contact form before you offer. We will talk through your plans, explain what a structure review covers, and agree a fixed fee before anything begins.
---
