Buy-to-let is a numbers game. If you’re looking to buy your first or next property, you’ve likely done the maths on the deposit, mortgage repayments, expected rent and potential return. But have you considered how those figures might change if you bought through a limited company, rather than in your own name? For many landlords, buying through a company can be more tax-efficient in the long run.
Limited companies usually suit portfolio landlords who are higher-rate taxpayers, have substantial borrowing, and wish to reinvest their profits. Personal ownership tends to suit basic rate taxpayers with one or two properties and little or no borrowing, who rely on rental income.
In this comparison guide, we’ll look at the key differences between personal and limited company buy-to-lets to help you decide which is best for you.
If you would rather talk it through, book a call with the Simmonds team.
What’s the difference between personal and limited company buy-to-let ownership?
The main difference is that if you buy in your personal name, you own the property directly, whereas if you buy through a company, the company owns it.
With personal ownership, it’s your name on the title deeds. The rent is paid directly to you, and you pay Income Tax on your taxable profits at your applicable rate.
If you buy through a limited company, it works differently. The company is owned by you, but it is a separate legal entity. All rental profits are received by the company and are subject to Corporation Tax. The money only becomes yours when you take it out of the company as salary, dividends, or a director’s loan, which is subject to income and /or dividend tax.
What is a Special Purpose Vehicle?
A Special Purpose Vehicle (SPV) is a limited company that’s set up for one purpose only: to buy, hold and let property. It must be registered with Companies House like any other company.
SPVs are preferred by many buy-to-let lenders, as they don’t have a complex trading history to unpick, nor do they have any unrelated business activities, which reduces risk. It also makes the underwriting process more straightforward.
Another benefit is that it’s easier to bring in partners and make share transfers.
Registering an SPV online is quick, simple and costs very little.
Tax considerations when purchasing buy-to-let property
Tax savings are the most compelling reason for incorporating your landlord business.
We’ll run through the different tax consequences here, but please remember: we’re mortgage brokers, not tax advisers. The information below doesn’t constitute advice – always consult a tax specialist or accountant before making decisions.
Income Tax for individual landlords
If you own a property personally, you receive rent directly. You must declare your rental income, any other self-employed income, and profits on a self-assessment tax return each year (and keep digital records and provide quarterly updates if your qualifying income exceeds the new Making Tax Digital threshold).
You can deduct allowable expenses, including letting agent fees, insurance, repairs and safety certificates, from your income before tax. Mortgage interest is not deductible; more on this below. What’s left is your taxable profits, which you will pay Income Tax on at your applicable rate.
Once you’ve paid the tax, the remaining profit is yours to use as you wish.
Corporation Tax for limited company landlords
If you own property through a company, it is considered a separate legal entity. That means it can own property, enter contracts, borrow money, receive income, owe debts and be taken to court in its own name. As a company director, you’ll still have legal duties, and lenders may require personal guarantees.
The company pays Corporation Tax on its rental profit at 19% up to £50,000 and 25% above £250,000, with marginal relief.
Crucially, a company can deduct mortgage interest payments in full as a business expense, avoiding the restriction placed on individual landlords.
For some higher-rate taxpayers and for landlords with larger borrowing, this can tip the balance in favour of setting up a company rather than buying property in their own names.
Does buying through a limited company result in double taxation for landlords?
The short answer is yes. First, rental profit is subject to Corporation Tax while it remains within the company. If the director takes dividends, they pay dividend tax on top. Salary works differently: it’s an allowable expense that reduces the company’s Corporation Tax bill, though Income Tax and National Insurance still apply.
That means in some cases, the costs simply aren’t worth it. Getting your accountant to model different scenarios is essential to see if the savings for you are actually worth it.
Is mortgage interest deductible for landlords?
Up until 2020, individual landlords could deduct mortgage interest payments and other finance costs from their income, reducing the tax they owed. That is no longer the case. Instead, individual landlords now receive a basic-rate tax credit worth 20% of qualifying finance costs.
For many landlords, the changes have meant higher tax bills and tighter margins, particularly for higher-rate taxpayers with larger mortgages. It also pushed some landlords from the basic rate to the higher rate tax band. It’s made company ownership more attractive to more landlords, although it doesn’t automatically make it the cheaper option for everyone.
And there is further change coming. From 6 April 2027, property income will be taxed at its own rates, two points above the standard bands. So if you are a higher-rate taxpayer with a mortgaged property, your tax bill will increase.
Capital gains on a rental property
When you come to sell a rental property you own personally, you pay Capital Gains Tax (CGT) on the gain you make (i.e., the difference between the purchase and sale price) after the annual exempt amount. You must report the gain to HMRC and pay tax within 60 days of completion.
When you sell property through a limited company, you don’t pay Capital Gains Tax. The gain is included in the company’s taxable profits and is included in the company’s Corporation Tax return instead.
This is why it’s worth thinking about your future plans before you buy a rental property. If your goal is to sell up in a few years and take the money, owning in your own name is usually the better option, as you are taxed once and the proceeds are yours. If you sell through a company, it pays Corporation Tax on the gain, and you would then pay dividend tax on top of it if you wanted to take the money out of the business.
How much Stamp Duty Land Tax is payable?
If you own a buy-to-let in your own name, you pay standard residential rates of SDLT, plus a 5% higher rates surcharge for additional properties.
If you buy through a company, you will always pay the 5% surcharge even on the first property.
*Where a company buys a single residential property for more than £500,000, a flat 17% rate can apply to the entire purchase price. However, a genuine buy-to-let SPV will usually avoid this, provided the property is purchased exclusively for a property rental business run for profit and let to unconnected third parties.
The key word here is ‘unconnected’. If a ‘non-qualifying individual’ such as a director, shareholder, or a close relative were to live in the property, the full 17% would apply, even if they were paying market rent.
Buy-to-let mortgages for individuals vs limited companies
Your choice of ownership dictates which mortgage lenders will consider you. Personal and limited company buy-to-let mortgages aren’t assessed in the same way, with different criteria around rental income, loan-to-value, personal guarantees, landlord experience, property type and portfolio size.
Lenders stress-test rental income using an interest coverage ratio (ICR), which measures whether rental income would comfortably cover mortgage interest if rates were to increase. For a higher-rate taxpayer borrowing in their own name, the ICR is often 145%. For a limited company, it is often lower at 125%. This is because companies can deduct mortgage interest payments, so less of the rental income is subject to tax and there is less risk for the lender.
As a result, a company can sometimes borrow more against the same property. However, limited company products usually have higher mortgage rates, larger arrangement fees and legal costs. So it’s a case of weighing up any tax or borrowing advantages against the total cost of the mortgage.
In addition, companies are usually restricted to specialist lenders. That said, the market has expanded considerably, and more mainstream lenders do consider SPVs with a personal guarantee from the director or shareholders.
This is why professional mortgage advice is very valuable. The cheapest-looking ownership structure for tax purposes may not result in the cheapest mortgage, or allow you to borrow what you need.
Does buying through a limited company affect which properties I can mortgage?
Whether you buy personally or through a company, lenders have rules on the types of property they will accept. Some exclude flats above commercial premises, HMOs, multi-unit blocks, short leases, unusual construction, and high-value or specialist properties.
Given that there are fewer available lenders when buying through a company, this can narrow your options further. A buy-to-let mortgage broker can check both the property and ownership structure against different lenders’ criteria and help you find the most suitable route.
Can family members invest through the same limited company?
Family members can invest in the same limited company, and it can be a beneficial way to share ownership and income. You can create different share classes allowing dividends to be paid at different levels, and shares can also be transferred to family members over time, subject to tax rules.
The potential downside is that it can affect the mortgage application. Directors and significant shareholders may be credit checked and asked for personal guarantees, so one person’s finances can influence the decision.
Should I transfer my existing property into a limited company?
Moving a property you already own into your company is treated as a sale. The company purchases the property at market value, and the purchase is subject to stamp duty. Personally, you could be subject to Capital Gains Tax if the property has increased in value.
Your existing mortgage will be redeemed in full, which may trigger an Early Repayment Charge (ERC). The company will then need to apply for a new limited-company buy-to-let mortgage, which usually comes with higher arrangement fees and interest rates.
So while transferring property to your limited company might generate an overall tax saving, that will be realised far more slowly than these immediate costs, so you must ensure you have enough capital available.
For most landlords with one or two properties, this probably won’t add up. However, it can be attractive for higher-rate taxpayers building large property portfolios, who intend to leave their profits in the business to compound and invest over time.
It’s important to model different scenarios with your accountant.
Buying rental property through a limited company or personally – differences at a glance
| Buy-to-let in your personal name | Buy-to-let through a limited company | |
|---|---|---|
| Who it typically suits | Landlords with one or two properties, lower borrowing and who rely on rental income. | Portfolio landlords (four properties or more), especially those looking to invest profits and grow further. |
| Who owns the property? | You own the property personally. | The company owns the property. |
| Income Tax | Due on rental profits via self-assessment. | Your personal income from the company (salary/dividends) is subject to income and/or dividend tax. |
| Corporation Tax | Not applicable. | The company pays Corporation Tax on rental profits. |
| Mortgage interest | Can’t be deducted; instead, there is a basic-rate 20% tax reduction for qualifying finance costs. | Interest and finance costs are deductible from profits before Corporation Tax. |
| Capital Gains Tax (CGT) | CGT is due on the profit you make from the sale of the property that exceeds the tax-free threshold. | Gains form part of the company’s taxable profits and are subject to Corporation Tax. Directors are subject to personal tax if they withdraw the proceeds from the business. |
| Stamp Duty | The 5% surcharge applies to additional properties | The 5% surcharge applies from the very first property. Special rules may apply to purchases over £500,000*. |
| Mortgage options | A wide choice of buy-to-let lenders and products. | You need a limited company buy-to-let mortgage from a specialist lender (not widely available from mainstream lenders). |
| Mortgage rates and fees | Access to mainstream buy-to-let pricing. | Mortgage fees and rates are generally a little higher than personal BTL rates. |
So, is a limited company or personal buy-to-let better?
The honest but somewhat frustrating answer is ‘it depends’.
Personal ownership is usually better if you:
- are a basic-rate taxpayer
- own one or two properties
- have minimal borrowing
- rely on the rent as income
It is cheaper to run, simpler to sell, and you only pay tax once on rental income.
A limited company is usually better if you:
- are a portfolio landlord (more than four properties)
- are a higher or additional rate taxpayer
- have a high loan-to-value ratio
- are planning on extending your portfolio
- wish to reinvest rental profit rather than spending it
While setting up a limited company has higher upfront costs, the tax savings often offset them within a few years. And with personal property tax rates set to rise further in April 2027, the gap will widen further, making the company route more viable for even more landlords.
It’s wise to get professional advice from your accountant, solicitor and mortgage broker when making the decision to make sure it’s a safe, commercially sound choice for you.
Find the right buy-to-let mortgage with Simmonds Mortgage Services
Buying personally or through a limited company can change the lenders, rates and mortgage options available to you. At Simmonds Mortgage Services, we’ll look at your plans, your property and your circumstances, then compare suitable options across the market.
Whether you’re buying your first rental, growing a portfolio or financing a more complex property, we’ll explain your options clearly and do the heavy lifting for you.
Call 0118 469 3037 or book a call with our team to talk through your next investment.
Frequently asked questions about buying property personally or via a company
Is it cheaper to buy a rental property through a limited company?
Not upfront. Company purchases are usually subject to higher mortgage rates and larger fees. So while there might be longer-term tax savings over a few years, the initial cost of buying through a company can be higher.
Do limited companies pay Capital Gains Tax on property?
No. A company pays Corporation Tax on the gain instead, at a relatively comparable rate. But the proceeds are subject to personal tax if you withdraw them from the company. This makes personal ownership a better route if your eventual goal is to sell up and take the money.
Can I get a buy-to-let mortgage through a new limited company?
Most specialist lenders are comfortable with new SPVs and don’t require evidence of trading history or annual accounts. Instead, they look at the directors’ income and experience and seek a personal guarantee.
Is mortgage interest tax deductible for a limited company?
Yes, mortgage interest is tax deductible for limited companies. Individual landlords can’t do this; instead, they receive a 20% tax credit on their financing costs. This is one of the most compelling reasons to incorporate if you plan on portfolio expansion.
Can I live in a property owned by my buy-to-let company?
No. Buy-to-let mortgage terms prohibit you, your shareholders or your families from living there, and HMRC would treat occupation by a director as a taxable benefit in kind.
Do landlords get tax relief?
Landlords can deduct certain allowable expenses from their rental income, such as letting agent fees. Individual residential landlords can also receive a basic-rate 20% tax reduction on qualifying finance costs, such as mortgage interest. Limited companies can deduct mortgage interest in full as a business expense.
Your property may be repossessed if you do not keep up repayments on your mortgage. Simmonds Mortgage Services does not provide tax advice. The information above is for general guidance only and reflects rates and rules current at the time of writing.
