“Should I move my rental properties into a limited company?” is one of the most common questions landlords bring to their accountant, and for good reason. The tax treatment of company-held property has pulled ahead of personal ownership over the past decade, and a change arriving in April 2027 widens the gap again.
The honest answer, though, is that it depends, and on more than the headline rates. Moving an existing portfolio into a company is itself a taxable event, and the cost of getting there can outweigh years of tax savings if the numbers don’t stack up. The question isn’t whether a company is more efficient in the abstract, but whether it’s more efficient for you once that cost is counted.
One thing to flag first. The rules differ across the UK, so this guide describes the position in England and Northern Ireland. Let’s dig in.
Why This Question Keeps Coming Up
The main reason is the way mortgage interest is treated, and it traces back to one rule change.
If you own property personally, you can no longer deduct your mortgage interest from your rental income before tax. Instead, you get a tax reduction worth 20% of the interest. For a basic-rate taxpayer that roughly matches the old position, but for a higher-rate taxpayer it doesn’t come close, because you’re taxed on income that leaves again as interest before you keep any of it. Our guide to mortgage interest relief covers exactly how that works.
A company isn’t caught by this. It deducts 100% of its mortgage interest as a business cost, the same as any other expense, before working out the profit it pays tax on. For a highly geared portfolio, that single difference can be substantial.
The Case for Holding Property in a Company
The mortgage interest point is the headline, but it isn’t the only draw.
A company pays corporation tax on its rental profit, not income tax. That’s 19% on profits up to £50,000 and 25% above £250,000, with a sliding rate in between, though those thresholds are divided between associated companies and reduced for short accounting periods, which matters if your portfolio runs through several company structures.
Set that against income tax at 40% or 45% for higher and additional-rate landlords, and the gap is clear. It widens further from 6 April 2027, when a new surcharge lifts the rates on personal property income by two percentage points, to 22%, 42% and 47% in England, Northern Ireland and Wales. Scottish taxpayers have their own income tax bands, so the comparison there is different.
The other advantage is control over the profit. Held personally, all your rental profit is taxed each year whether you spend it or not. In a company, profit you leave in the business is only taxed at corporation tax, and you don’t pay personal tax until you draw it out. If you’re reinvesting to grow a portfolio, that lets you buy your next property from profits that have been taxed only once, at the lower rate.
| Personal ownership | Company ownership | |
|---|---|---|
| Mortgage interest | 20% tax reduction (22% from April 2027) | Fully deductible |
| Tax on profit | Income tax (20–45%, rising in 2027) | Corporation tax (19–25%) |
| Undrawn profit | Taxed in full each year | Only corporation tax until drawn |
| Passing on to family | Transfer of property | Transfer of shares |
Passing shares in a company to your children is often simpler and more flexible than transferring property itself, which makes a company worth considering as part of longer-term succession planning. Our landlord’s guide sets these points in the wider context of where landlord tax is heading.
The Cost of Getting There
This is the part that decides most cases, and it’s where the tax case meets reality. Moving an existing portfolio into a company isn’t a reshuffle on paper – in law it’s a sale from you to the company, and because you control the company, HMRC treats it as happening at full market value whatever changes hands. That triggers two charges.
The first is Capital Gains Tax. Every property is treated as sold at today’s value, so any gain since you bought it becomes taxable, at 18% or 24% on residential property. The second is the tax on the purchase itself, which the company pays on the market value of everything transferred, plus the surcharge that applies to additional dwellings – 5% under Stamp Duty Land Tax in England and Northern Ireland.
Wales charges Land Transaction Tax and Scotland charges Land and Buildings Transaction Tax, each with its own surcharge, so the cost varies depending on where your properties sit. You can see the stamp duty rates on GOV.UK.
Two reliefs can soften this, but both come with strict conditions:
- Incorporation Relief (Section 162) defers the Capital Gains Tax, rolling the gain into your new shares rather than charging it on transfer. To qualify, your letting has to amount to a business in its own right rather than passive investment, and you must transfer the whole business in exchange for shares. From 6 April 2026, you also have to claim it on your tax return rather than receiving it automatically. HMRC examines these claims closely, so the business test has to be clearly satisfied.
- The partnership route can reduce, and sometimes remove, the Stamp Duty charge where the portfolio operates as a partnership in substance. The outcome turns on detailed rules about ownership and partnership shares rather than a simple checklist, and you’d need credible evidence that the partnership existed and operated in practice. HMRC challenges “overnight” partnerships set up just before incorporating, and can strike them down under its anti-avoidance rules.
The upshot is that incorporating an established portfolio can carry a large upfront capital gains tax and purchase-tax cost, and whether the reliefs apply hinges entirely on how your portfolio is owned and run. This is not a decision to make without proper modelling.
The Ongoing Trade-offs
Even once you’re incorporated, company ownership isn’t cost-free.
Company buy-to-let mortgages usually carry rates around 0.3% to 0.7% higher than the equivalent personal products, and lenders almost always require a personal guarantee, so the limited liability doesn’t extend to the borrowing. The admin steps up, too. You’ll have annual accounts and a corporation tax return to file, higher accountancy fees, and Companies House duties that personal ownership avoids.
Then there’s the cost of getting money out. Profit inside the company has been taxed at corporation tax, but taking it as dividends brings a second, personal charge on top – above the £500 dividend allowance, at 10.75%, 35.75% or 39.35% depending on your income.
If you need most of the rental income to live on, that second layer can erode the benefit. The company structure rewards landlords who can leave profits in the business, not those who need to draw everything out.
One further point on the personal side. Individual landlords and sole traders whose combined gross qualifying income from property and self-employment exceeded £50,000 in 2024/25 have had to use Making Tax Digital for Income Tax since 6 April 2026, with quarterly reporting to HMRC – an admin burden company ownership sidesteps, though it swaps it for company filing instead.
Comprehensive Table: Landlord Sole Trader vs Limited Company
Incorporation at a Glance: The Pros and Cons
Weighing it up, here’s how the main advantages and drawbacks stack up against each other.
| Area | The case for incorporating | The case against |
|---|---|---|
| Mortgage interest | A company deducts 100% of its mortgage interest as a business cost before tax | Personally you get only a 20% tax reduction (22% from April 2027 in England, Wales and NI), so the benefit is mostly for higher-rate landlords |
| Tax rate on profit | Corporation tax of 19–25%, well below higher-rate income tax | The gap only helps if your rental profit would otherwise be taxed at 40% or 45%; a basic-rate landlord sees little difference |
| Retained profit | Profit left in the company is taxed only at corporation tax, so you can reinvest more into the next purchase | The moment you draw it out as dividends, a second personal charge applies (above the £500 allowance, at 10.75–39.35%) |
| Cost of transferring in | – | Moving an existing portfolio is a sale at market value, triggering Capital Gains Tax (18% or 24%) and stamp duty, including the 5% surcharge on additional dwellings |
| Reliefs on transfer | Incorporation Relief can defer the CGT, and the partnership route can cut the stamp duty | Both carry strict conditions HMRC scrutinises closely, and neither is guaranteed; from April 2026 you must claim Incorporation Relief on your return |
| Mortgages | A growing range of limited company buy-to-let products is available | Rates run roughly 0.3–0.7% higher, and lenders usually require a personal guarantee, so limited liability doesn’t cover the borrowing |
| Admin and cost | More structured, business-like accounts | Annual accounts, a corporation tax return, Companies House duties and higher accountancy fees that personal ownership avoids |
| Making Tax Digital | Company ownership sidesteps MTD for Income Tax | It swaps it for company filing instead, so there’s no admin saving overall |
| Succession | Passing shares to family is often simpler and more flexible than transferring property | Setting it up well needs proper planning to get the share structure right |
So Who Does Incorporation Mostly Suit?
Incorporation tends to make sense for higher or additional-rate taxpayers with larger, more heavily mortgaged portfolios who plan to keep growing and can leave profits in the business to reinvest.
For them, the full interest deduction, the lower tax rate on retained profit, and the succession flexibility can add up to a saving big enough to justify the cost of the move.
It tends not to make sense for a landlord with one or two properties, modest borrowing, and income that sits within the basic-rate band. Here the annual saving is often small, while the upfront Capital Gains Tax and purchase tax can be considerable, so the numbers rarely justify it.
A middle path is also worthy of consideration. If the appeal is mainly for future purchases, you can buy new properties through a fresh company while leaving your existing ones in your own name.
That gives new, leveraged purchases the company tax treatment from day one, with no gain to crystallise and no purchase tax on a transfer, and avoids the cost of incorporating what you already hold. Our guide to setting up a company looks at that route in more detail.
How Double Point Can Help
Incorporating a rental portfolio is one of those decisions where the right answer differs from one landlord to the next, and where a wrong move is expensive to reverse. The tax case can look compelling, but it only holds up once the cost of getting there, and the way you use your rental income, are factored in.
This guide is general information, not personal advice. Whether incorporation is right for you depends on your income, your portfolio, your borrowing, where your properties are, and how they’re owned and run, so it’s a decision to model properly before you act.
At Double Point, our chartered accountants work through exactly this with landlords across the UK – modelling the numbers on both sides, weighing up the reliefs, and setting up and running the company if it’s the right move. Our tax planning service is built for decisions like this one.
Book a consultation and we’ll help you work out whether incorporating is worth it for your portfolio.