More landlords are holding property through a limited company than ever before, and the reason mostly comes down to tax.
Section 24 restricted mortgage interest relief for individual residential landlords, replacing the previous deduction with a basic-rate tax reduction. Property income is about to be taxed at its own higher rates. Companies, meanwhile, still deduct their mortgage interest before working out taxable profit, and pay corporation tax rather than income tax.
A company addresses some of these problems while creating others. It suits a certain kind of landlord and is a poor fit for plenty of others. Here’s what actually matters when you’re weighing it up.
Why So Many Landlords Have Incorporated
The shift has been steady rather than sudden. According to Paragon’s analysis of industry mortgage data, limited companies accounted for 43% of mortgaged buy-to-let house-purchase transactions in 2025, up from 35% in 2024 and 7.5% in 2018, though that dataset also includes some transfers from personal ownership into companies. Separately, Hamptons estimates that 66,587 new buy-to-let companies were formed during 2025.
The driver is Section 24, phased in from April 2017 and fully in force from April 2020. Individual landlords can no longer deduct mortgage interest when calculating taxable property profit. Instead they get a basic-rate tax reduction, generally worth up to 20% of their qualifying finance costs, subject to limits based on property profits and adjusted total income. For a higher-rate taxpayer, that means being taxed on income that goes straight back out to the lender.
Companies were never caught by Section 24. They can generally deduct qualifying mortgage interest as a business expense before working out taxable profit, and then pay corporation tax rather than income tax at 40% or 45%.
One thing worth being clear about, because it’s often glossed over: corporation tax is not a flat 19%. The rates are:
- 19% on profits up to £50,000 (the small profits rate).
- 25% on profits above £250,000 (the main rate).
- Marginal relief in between, which produces an effective marginal rate of 26.5% on profits in that band.
The £50,000 and £250,000 thresholds are also divided between associated companies, so a landlord with more than one company can reach the higher rates sooner than expected.
The Case for a Limited Company
Set against personal ownership, a company offers some real advantages.
Deducting Mortgage Interest
This is the main one. Take a landlord with £20,000 of rental income and £12,000 of mortgage interest. Held personally by a higher-rate taxpayer, the £20,000 is taxed at 40% (£8,000), reduced by a £2,400 finance-cost reduction, leaving £5,600 of tax. In a company, the interest comes off first, leaving £8,000 of profit taxed at 19% – £1,520.
That comparison assumes no other expenses, sufficient income to use the finance-cost reduction in full, no associated companies, and company profits within the small-profits threshold.
Your own figures will differ. On a leveraged portfolio, this can create a substantial company-level tax advantage while profits remain inside the company. The eventual benefit depends on the corporation tax rate that applies and on how and when the money is withdrawn.
Retaining Profits for Growth
If you’re building a portfolio rather than living off the rent, a company lets you leave profits inside it, taxed only at corporation tax rates, and put them towards the next purchase. That’s a genuine advantage over personal ownership, where tax comes off the top whether you spend the money or not.
Flexibility on Ownership
Shares can be easier to divide and transfer than individual properties, and different share classes can give you control over who receives what. That flexibility is real, but it comes with two warnings.
Giving shares away is normally a disposal at market value for Capital Gains Tax, and an ordinary property-letting company is an investment business, so its shares don’t usually qualify for Business Relief from inheritance tax. Incorporating is not, in itself, an inheritance tax solution.
Limited Liability, With a Caveat
The company is a separate legal entity, so in principle its debts are its own. In practice, many limited-company buy-to-let lenders require personal guarantees from the directors, which substantially reduces the protection where the mortgage is concerned.
The Case Against
None of this makes a company the right answer by default, and the drawbacks are substantial.
Moving Existing Properties In Is Expensive
This is where most landlords come unstuck. Transferring a property you already own into your own company is usually treated as a disposal at market value, even though nothing really changes hands. That brings:
- Capital Gains Tax on the growth in value since purchase, at 18% or 24% for residential property.
- Stamp Duty Land Tax, potentially charged by reference to market value and including the additional property rates. SDLT applies in England and Northern Ireland; Scotland and Wales have their own transaction taxes.
- Legal and refinancing costs, since you are effectively selling and buying again.
Incorporation Relief can defer the Capital Gains Tax where the activity amounts to a genuine business and the statutory conditions are met. Whether a portfolio qualifies depends on the level and nature of your own involvement rather than on whether you use a letting agent, and HMRC will generally accept a claim where someone spends at least 20 hours a week on the business, while considering other cases on their facts.
For transfers from 6 April 2026, the relief has to be claimed through Self Assessment rather than applying automatically. Even then, it defers the gain into the shares rather than removing it. Special rules can also reduce the SDLT charge where a genuine property partnership transfers to a connected company.
Be careful here: joint ownership or joint receipt of rent does not, by itself, establish that a partnership exists, and the rules are highly fact-specific.
Transfer costs can take many years to recover, and in some cases will outweigh the tax savings entirely. The only way to know is to model your own numbers.
Getting the Money Out Costs More
A company saves tax on the way in, but there’s a second charge on the way out if you take profits as dividends. Dividend tax rose in April 2026 to 10.75% for basic-rate and 35.75% for higher-rate taxpayers, with the Dividend Allowance still at £500. Salary and employer pension contributions have their own tax treatment.
Repayment of a genuine director’s loan can normally be received without dividend tax, but only to the extent the company actually owes you money – it returns your own funds rather than distributing profit. If you need the rental income to live on, that second layer of tax erodes much of the benefit.
The same issue appears on exit. When a company sells a property it pays corporation tax on the gain, and you may be taxed again when the proceeds come out. Held personally, there’s generally one Capital Gains Tax charge and that’s the end of it.
Running Costs and Admin
A company means annual accounts, a confirmation statement, a corporation tax return and proper bookkeeping. These obligations generally create additional compliance work and cost compared with straightforward personal ownership.
A company holding residential property worth more than £500,000 may also fall within the Annual Tax on Enveloped Dwellings regime; a genuine letting business can usually claim relief from the charge, but often still has to file a relief declaration return.
On borrowing, the gap has narrowed in parts of the market, though company products can still carry higher rates, fees or tighter criteria. Compare them on total cost, not the headline rate.
What Changes in 2027
Here’s the development that sharpens the whole question, and it hasn’t reached most landlord guides yet.
From April 2027, property income in England, Wales and Northern Ireland will be taxed at its own rates: 22% basic, 42% higher and 47% additional, with finance-cost relief given at 22%. Scotland runs its own income tax framework. The currently legislated corporation tax rates are unchanged, so individual landlords take the hit while company landlords don’t.
Set that against the dividend rise from April 2026, and the picture sorts landlords by what they do with the money:
- If you retain and reinvest profits, incorporation looks stronger from 2027, as personal property income becomes more expensive while corporation tax remains unchanged.
- If you draw profits out to live on, the higher dividend rates claw back much of that advantage.
So When Does It Actually Make Sense?
There’s no reliable minimum profit threshold at which a company suddenly starts operating. The outcome turns on your borrowing, your tax band, the company’s profit level, whether you need the income, and how long you’ll hold the properties. A landlord with modest but heavily leveraged profits might benefit, while another with larger unleveraged profits they need to spend might not.
As a general direction, a company tends to look more attractive if you’re a higher or additional-rate taxpayer with meaningful mortgage debt who intends to reinvest. It’s often less compelling for a basic-rate taxpayer with little borrowing who needs to withdraw the profits, though even that depends on the full figures, and from April 2027 the property basic rate will be 22% rather than 20%.
A common approach is to keep existing properties in personal names and buy future ones through a company. That avoids triggering transfer taxes on what you already own, though the company still pays the applicable transaction tax on each new purchase.
How Double Point Can Help
There’s no universal answer here. The right structure depends on your tax band, your borrowing, your other income, whether you’re building or drawing down, and what you plan to do with the portfolio in ten years’ time.
At Double Point, we model this properly for landlord clients – the tax saved, the cost of getting there, the break-even point, and what happens when you eventually sell or pass the portfolio on. If a company is right for you, we’ll set it up and handle the company accounts. If it isn’t, we’ll show you the numbers that say so and look at what else can be done through tax planning instead.
To find out which side of the line you fall on, book a consultation with us today.