A quick note: this article is general information, not personal advice. Tax and accounting rules change and everyone's situation is different, so please don't act on anything here without checking how it applies to you. We'd be happy to help — get in touch before making any decisions.
Should your next buy-to-let go into a limited company or stay in your own name? Landlords ask us this all the time. The honest answer is "it depends", but there are some clear principles that will tell you which side of the line you're on.
The structural difference
Own a property personally and the rent, after expenses, lands on your self-assessment return and is taxed at your marginal rate: 20%, 40% or 45%. Hold it through a limited company and things work differently. The company pays corporation tax (19% or 25%) on the rental profit, and you only pay personal tax when you take money out as salary or dividends.
Five things that push you toward a limited company
- You're a higher- or additional-rate taxpayer. Section 24 means full mortgage interest relief inside a company, but only a basic-rate credit personally. The bigger your portfolio, the wider that gap gets.
- You want to reinvest profits. Inside a company, post-tax profit can be recycled straight into the next deposit, without you having to take it out and pay personal tax on it first.
- You're thinking long-term about inheritance tax. Companies open the door to share-based gifting, freezer shares and other planning structures.
- You want to limit personal liability. Limited companies do exactly what the name suggests.
- You're building a portfolio with a business partner. Sharing rental income through a company is far cleaner than personal joint ownership.
Five things that push you toward personal ownership
- You're a basic-rate taxpayer and likely to stay one. Personal ownership is simpler and usually cheaper in tax overall.
- You need the rent as personal income. Taking money out of a company costs you additional dividend tax.
- You want the cheapest mortgages. Personal buy-to-let rates are usually lower than limited-company SPV rates, although that gap has narrowed.
- You only plan to own one or two properties. At small scale, the corporate compliance overhead (accounts, corporation tax, a Confirmation Statement) can wipe out the tax benefit.
- You may live in the property in future. Private residence relief is only available on homes you own personally.
The numbers, a quick illustration
Take a higher-rate landlord looking at a new £200,000 buy-to-let with a £150,000 mortgage:
- Annual rent: £12,000
- Mortgage interest at 5.5%: £8,250
- Other expenses: £1,500
Personally: Profit (ignoring interest) = £10,500. Tax at 40% = £4,200. Less 20% credit on £8,250 = £1,650. Net tax = £2,550. Cash after tax ≈ -£300. Yes, a loss after tax, and that's before you've repaid a penny of the principal.
Limited company: Profit = £12,000 − £8,250 − £1,500 = £2,250. Corporation tax at 19% = £427. Cash left in the company = £1,823, ready to reinvest with no further tax until you extract it.
Don't forget SDLT
A limited company always pays the 3% additional-property SDLT surcharge on residential purchases, even on its very first property. Personal buyers only pay it where the property isn't their main home. That's a real upfront cost the company route has to absorb.
Transferring an existing portfolio
Moving properties you already own into a company counts as a sale and purchase at market value. That triggers CGT for you personally and SDLT for the company. Where a partnership meets certain conditions, incorporation relief and SDLT partnership reliefs can shelter much of that cost, but the rules are strict and well tested by HMRC. Take advice before you assume you qualify.
So which wins?
For new purchases, higher- and additional-rate landlords who are building a portfolio and reinvesting tend to come out ahead in a company. Basic-rate landlords buying their first property are almost always better off personally. Everyone in between needs the numbers run properly; it isn't a rule of thumb.
We run this analysis for landlords every week, and we'll do it for you free of charge as part of an initial consultation. Book one here, or read more about our property tax specialists in Kent.