If you've heard that "everyone's putting their property into a company now", you're not imagining it. Since the mortgage interest rules changed, a lot of landlords have asked us the same thing: would I be better off owning my buy-to-lets through a limited company instead of in my own name?
It's a fair question, and the honest answer is that it depends. For some landlords a company saves real money every year. For others it adds cost and hassle for no benefit, and the move itself can trigger a tax bill that wipes out years of savings.
This guide walks through how each option is taxed in 2025/26, shows the numbers side by side with an illustrative example, and gives you a clear set of questions to work through before you decide. It's written for residential buy-to-let landlords in England, Wales and Northern Ireland. (Scotland sets some of its own rates, so a few figures here won't apply north of the border.)
Why are so many landlords using a limited company?
The big driver is a rule often called Section 24, after the part of the Finance Act 2015 that introduced it.
Since 6 April 2020, individual landlords can no longer deduct their residential mortgage interest (and other finance costs) from rental income as a normal expense. Instead, relief is restricted to the basic rate of Income Tax. You work out tax on the full rental profit, then knock off a tax reducer worth 20% of your finance costs (gov.uk).
For a basic-rate taxpayer that's broadly neutral. For a higher-rate or additional-rate landlord it stings, because you're taxed on income you never really kept, and you only get relief at 20% on the interest you actually paid.
Companies aren't caught by this restriction. A limited company still deducts mortgage interest in full as a business cost before working out its taxable profit. That single difference is why incorporation has become such a common conversation.
It isn't the whole story, though. The company has to pay Corporation Tax, and getting the money out into your own pocket usually means a second layer of tax. The rest of this guide weighs that up.
How is rental income taxed when you own personally?
Own the property in your own name and the rental profit is added to your other income and taxed at your marginal rate of Income Tax for 2025/26:
| Band | Rate | Applies to total income |
|---|---|---|
| Basic rate | 20% | £12,571 to £50,270 |
| Higher rate | 40% | £50,271 to £125,140 |
| Additional rate | 45% | over £125,140 |
Source: gov.uk Income Tax rates. The first £12,570 is covered by the personal allowance for 2025/26, which tapers away once your income passes £100,000.
The catch is the finance cost restriction above. Your mortgage interest doesn't reduce the profit you're taxed on. It only earns you a 20% tax credit at the end of the sum. The more you borrow and the higher your tax band, the more that hurts.
If you ever sell, the gain is charged to Capital Gains Tax. For residential property in 2025/26 that's 18% within your basic-rate band and 24% above it, after deducting the annual exempt amount of £3,000 (gov.uk Capital Gains Tax rates).
How is rental income taxed through a limited company?
A company is a separate legal person, so the tax works in two stages.
Stage one: Corporation Tax on the profit. The company deducts allowable costs, including the full mortgage interest, then pays Corporation Tax on what's left. For the financial year from 1 April 2025 the small profits rate is 19% on profits up to £50,000, rising through marginal relief to a main rate of 25% on profits over £250,000 (gov.uk Corporation Tax rates). Most single-property and small portfolios sit in the 19% band.
Stage two: getting the money out. Profit left in the company can be reinvested or used to repay borrowing with no further personal tax. But take it as salary or dividends and you'll pay personal tax on the way out.
For 2025/26 the first £500 of dividends is tax-free (the dividend allowance), then dividends are taxed at 8.75% in the basic-rate band, 33.75% in the higher-rate band and 39.35% in the additional-rate band (gov.uk Tax on dividends).
So a company shines when you want to roll profits up to buy more property or repay debt, and it's less clear-cut when you need every penny of the rent to live on.
Limited company vs personal ownership: a side-by-side comparison
| Factor | Personal ownership | Limited company |
|---|---|---|
| Mortgage interest relief | Restricted to a 20% tax credit | Fully deductible against profit |
| Tax on profit | 20% / 40% / 45% Income Tax | 19% to 25% Corporation Tax |
| Tax to get profit into your hands | None, it's already yours | Dividend or salary tax on extraction |
| Tax on selling a property | CGT at 18% / 24% (residential) | Corporation Tax on the company gain |
| Mortgage choice | Wider, often cheaper rates | Fewer lenders, often higher rates |
| Running costs | Self Assessment only | Annual accounts, company tax return, filings |
| Best suited to | Lower-geared or basic-rate landlords, or those drawing all the income | Higher-rate landlords reinvesting profits and growing a portfolio |
The headline pattern: a company tends to win for higher-rate, higher-borrowing landlords who reinvest, while personal ownership often wins for basic-rate landlords or anyone who needs to spend the rent.
Illustrative example: a higher-rate landlord
Illustrative example. Priya is a higher-rate taxpayer with one buy-to-let. It produces £30,000 of rental profit before mortgage interest, and her interest-only mortgage costs £12,000 a year in interest. Figures use 2025/26 rates.
Owning personally
- Taxable rental profit: £30,000 (interest isn't deductible).
- Income Tax at 40%: £12,000.
- Less the 20% finance cost credit on £12,000 of interest: £2,400.
- Income Tax due: £12,000 − £2,400 = £9,600.
- Cash kept: £30,000 rent − £12,000 interest − £9,600 tax = £8,400.
Owning through a company
- Profit after deducting the full £12,000 interest: £18,000.
- Corporation Tax at 19%: £3,420.
- Profit retained in the company: £18,000 − £3,420 = £14,580.
If Priya leaves that £14,580 in the company to save towards her next deposit, she's £6,180 a year better off than owning personally.
If instead she draws it all out as a dividend, she pays dividend tax. After her £500 dividend allowance, £14,080 is taxed at the higher dividend rate of 33.75%, which is £4,752. She nets £14,580 − £4,752 = £9,828, still £1,428 ahead of personal ownership, and more if some of the dividend falls in her basic-rate band.
The gap widens with bigger mortgages and narrows if the borrowing is small. This is illustrative only; your own numbers, other income and plans for the cash all change the answer. You can sketch the personal side quickly with our income tax calculator before getting tailored advice.
What does it cost to move existing property into a company?
This is where good intentions meet a tax bill. Moving property you already own into a company is not free, and for many landlords the entry costs outweigh the annual saving.
Capital Gains Tax. Transferring a property to your own company counts as a disposal at market value, so any gain since you bought it can be taxable at 18% or 24% (gov.uk Capital Gains Tax rates). Incorporation relief under section 162 can defer that gain, but only if you're genuinely transferring a property business as a going concern in exchange for shares, and HMRC applies real conditions to whether a portfolio qualifies (HMRC Capital Gains Manual CG65700). It is not automatic for a casual one-property let.
Stamp Duty Land Tax. The company is buying the property from you, so SDLT can apply, and as a company purchase of an additional dwelling it normally attracts the 5% higher-rate surcharge on top of the standard rates (gov.uk SDLT residential rates).
Mortgage costs. You usually have to redeem the personal mortgage and take a new company buy-to-let loan. Company products tend to have fewer lenders and can carry higher rates, plus arrangement and legal fees.
Ongoing admin. A company means annual accounts, a Corporation Tax return and Companies House filings every year, on top of your own Self Assessment. Our corporation tax services cover this, but it's real cost and time.
None of this means incorporation is wrong. It means the sums have to clear a higher bar for an existing portfolio than for property you're buying fresh inside a company from day one.
Should you incorporate? A simple decision checklist
Work through these before you commit. The more you answer "yes", the more a landlord limited company is worth modelling properly.
- Are you a higher-rate or additional-rate taxpayer? If you're a basic-rate taxpayer, Section 24 barely touches you and a company may add cost for little gain.
- Is your borrowing significant? The bigger your mortgage interest, the more the full-deduction advantage is worth.
- Do you plan to reinvest the profits? Companies are strongest when you're rolling cash into more property, not drawing it all out to live on.
- Are you buying new property rather than moving existing stock? Buying fresh inside a company avoids the CGT and SDLT entry costs.
- Are you building for the long term, including succession? Shares can be easier to pass on gradually than bricks and mortar.
If most of those point one way, the decision is usually clear. If they're mixed, model both options with your actual figures before doing anything.
Want help running your own numbers?
Every portfolio is different, and a few thousand pounds of mortgage interest can flip the answer. Book a free call with a Zmartly accountant and we'll model personal ownership against a company structure on your real figures, including the cost of getting there. Start with our tax advisory service for landlords.
Frequently asked questions
Do I save tax by putting my buy-to-let in a limited company?
Sometimes. A company deducts mortgage interest in full and pays Corporation Tax from 19%, which often beats personal Income Tax for higher-rate landlords with sizeable borrowing. But you may pay dividend tax to get the money out, and moving existing property in can trigger Capital Gains Tax and the 5% SDLT surcharge. It's a calculation, not a rule.
Can a limited company still deduct mortgage interest in full?
Yes. The Section 24 restriction that limits individual landlords to a 20% tax credit on finance costs does not apply to companies. A company treats mortgage interest as a normal business expense and deducts it before working out taxable profit.
How much Corporation Tax does a property company pay in 2025/26?
For the financial year from 1 April 2025, a company pays 19% on profits up to £50,000. Profits between £50,000 and £250,000 are taxed at the main 25% rate with marginal relief, and profits above £250,000 at the full 25%. Most small portfolios fall in the 19% band.
Will I pay tax twice through a company?
Potentially. The company pays Corporation Tax on its profit, and you pay Income Tax on any salary or dividends you take out (dividends are taxed at 8.75%, 33.75% or 39.35% for 2025/26 above the £500 allowance). If you leave profits in the company to reinvest, there's no second charge until you extract them.
Is it worth moving an existing portfolio into a company?
Often less so than buying fresh inside one. Transferring property you already own is a disposal for CGT and usually a company purchase for SDLT, which can mean a large up-front bill. Incorporation relief may defer the CGT if you genuinely run a property business, but it's not automatic. Always model the entry costs against the annual saving first.
