Landlord limited company: pros, cons and how to set one up

Holding rental property through a limited company can cut a higher-rate landlord’s tax bill, mainly because a company deducts mortgage interest in full while an individual landlord receives only a 20% tax credit. It is not the right structure for everyone. Incorporation brings higher mortgage rates, more administration, and, for landlords who already own property personally, a tax charge on transfer that often outweighs the saving. This guide sets out the tax difference, the costs on both sides, who tends to benefit, and how to set a company up, with the 2026 rules and rates that decide the outcome.

Pros and cons at a glance

The case for a company rests on tax and flexibility. A company deducts mortgage interest in full before profit, unlike an individual landlord caught by Section 24; it pays corporation tax of 19% to 25% on profit rather than income tax at 40% or 45%; it sits outside the 2% property income tax rise that applies to individuals from April 2027; it lets profits stay in the company and be reinvested without an immediate personal tax charge; and it can simplify succession by passing on shares rather than property.

The case against rests on cost and complexity. Profit taken out personally is taxed twice, as corporation tax and then dividend tax. Company mortgages are fewer and usually dearer. Moving an existing personally-held property into a company is a sale at market value that triggers Capital Gains Tax and Stamp Duty Land Tax. The company must file annual accounts and a corporation tax return, and accountancy fees are higher. Limited liability is also weaker in practice, because most lenders still require personal guarantees.

In short, incorporation tends to suit a higher-rate taxpayer building a new, mortgaged portfolio. It rarely suits a landlord who simply wants to move one or two existing properties into a company, where the upfront tax on transfer usually defeats the purpose.

How the tax treatment differs

The difference between holding property personally and through a company comes down to how the profit is taxed.

Personal ownership: income tax on rental profit

An individual landlord adds net rental profit to their other income and pays income tax at their marginal rate. At the Autumn Budget 2025, the Chancellor confirmed a separate set of property income tax rates from 6 April 2027, two percentage points above the standard rates, so basic, higher and additional rate landlords will pay 22%, 42% and 47% on rental profit. Finance cost relief continues at the basic rate, which rises to 22%.

Since the restriction of mortgage interest relief under Section 24, an individual landlord can no longer deduct mortgage interest from rental income. They receive a 20% tax credit instead, which has cut the after-tax return on highly geared property for higher-rate taxpayers.

Company ownership: corporation tax

A company pays corporation tax on its profit rather than income tax, and it deducts mortgage interest in full first. The small profits rate is 19% on profits up to £50,000, the main rate is 25% on profits above £250,000, and marginal relief tapers the rate between those thresholds. A single-property company often pays 19%, while a growing portfolio moves into the marginal band, so the headline figure depends on profit.

The tax does not end there. To spend the money personally a director draws it out, usually as a small salary plus dividends, and dividends are taxed again. Since 6 April 2026 the ordinary and upper dividend rates have been 10.75% and 35.75%, with the additional rate unchanged at 39.35%, after a £500 dividend allowance. That second layer is why a company works best when profit is retained and reinvested rather than drawn each year.

The case for incorporating

Full mortgage interest deduction

The largest advantage for a geared landlord is deducting mortgage interest in full. Take a property producing £30,000 of rent with £15,000 of mortgage interest and £5,000 of other allowable expenses. A higher-rate individual is taxed on £25,000 and then receives a 20% credit on the £15,000 interest. A company is taxed on £10,000, the profit after deducting everything including the interest. On a heavily mortgaged property the gap is large, and it is the single biggest reason higher-rate landlords incorporate.

Outside the 2% property income tax rise

The property income tax rates rising to 22%, 42% and 47% from April 2027 apply to individuals, not companies, which continue to pay corporation tax. For a landlord with a substantial portfolio held personally, that two-point difference compounds year on year.

Retained profit and reinvestment

Profit left inside the company is taxed only at the corporation tax rate, with no dividend tax until it is drawn. A landlord reinvesting rent into the next deposit keeps more working capital than an individual who is taxed in full each year before reinvesting.

Succession planning

Property in a company does not pass through your estate as bricks and mortar; you pass on shares. With careful share structuring this can make Inheritance Tax and succession planning more flexible, which is why family investment companies appeal to landlords building wealth for the next generation. The detail is genuinely complex and needs specialist advice.

Some liability separation

A company is legally separate from its owners, so creditors generally cannot pursue your personal assets beyond what you put in. In practice the protection is partial, because most buy-to-let lenders require personal guarantees from directors, and directors remain liable for wrongful trading.

The case against incorporating

Transferring existing property is expensive

Moving a property you already own into a company is treated as a sale to the company at market value, which is what makes incorporation costly for established landlords. The transfer triggers Stamp Duty Land Tax at the residential rates plus the 5% additional-dwellings surcharge, which rose from 3% at the Autumn Budget 2024. On a £300,000 property that is roughly £20,000 of SDLT before any other cost; you can check the figure for a specific price with our stamp duty calculator. Capital Gains Tax is also due on the gain since you bought the property.

There is one route that can defer the CGT. Where a genuine property business run as a partnership is transferred to a company, incorporation relief under section 162 may roll the gain into the value of the shares, though it does not remove the SDLT and HMRC applies it narrowly. Our property incorporation tax entry explains how the relief and the SDLT interact. You would also need a new company buy-to-let mortgage, as a personal mortgage cannot transfer, and you can model the rate difference with our buy-to-let mortgage calculator. Taken together, these costs are why incorporation usually makes sense for new purchases rather than existing portfolios.

Tax on taking money out

Profit is taxed at the corporation tax rate inside the company and again as dividend tax when drawn, at 10.75%, 35.75% or 39.35% depending on your band. For a landlord who needs the rental income to live on, that combined charge can match or exceed what they would pay as an individual, which is why the company advantage is greatest when profit stays invested.

Dearer and scarcer mortgages

Fewer lenders offer limited company buy-to-let, and those that do typically charge higher rates and arrangement fees than personal products, with personal guarantees expected. A specialist broker is worth using before committing to the structure.

More administration

A company files annual accounts at Companies House within nine months of its year-end and a corporation tax return within twelve months, with the tax due nine months and one day after the year-end. It keeps statutory registers, files an annual confirmation statement, and runs PAYE if it pays a salary. Private companies do not need to hold an annual general meeting, but accountancy fees still run to roughly £1,000 to £3,000 a year, well above the cost of a personal Self Assessment return, and a specialist property accountant is often needed.

Lost personal CGT allowance and reliefs

An individual selling a property can use the annual CGT exempt amount, which is £3,000, and may claim Private Residence Relief on a property they once lived in. A company has no annual exemption and pays corporation tax on the whole gain, so a landlord planning to sell before long may pay more through a company than personally.

Less flexible access to equity and less privacy

Equity inside a company belongs to the company. Releasing it for personal use usually means the company borrowing and then paying out a taxed dividend, rather than a simple personal remortgage. Company accounts are also public at Companies House, so turnover, profit and director details can be viewed by anyone, which some landlords would rather keep private.

Who incorporation suits, and who it does not

Incorporation tends to work for a higher-rate taxpayer building a new, mortgaged portfolio, for a long-term investor who reinvests profit rather than drawing it, and for a landlord focused on passing wealth to the next generation through shares. New purchases in these cases are almost always made through a special purpose vehicle (SPV), a company set up solely to hold property, because that is the structure buy-to-let lenders expect.

It tends not to work for a landlord with one or two properties, where accountancy costs can swallow the saving, for a landlord who needs the rent as regular income and would be taxed twice to draw it, for properties with little or no mortgage, where the interest-deduction advantage is small, and for anyone planning to sell soon, who would lose the personal CGT exemption and reliefs. Moving an established personally-held portfolio into a company rarely pays unless it is large, heavily mortgaged, and held for many more years.

Hybrid approaches

The decision need not be all or nothing. Many landlords keep existing properties in their personal name to avoid the transfer cost while buying new properties through a company. Others form a company for larger or HMO projects alongside personally held standard lets, or run a separate management company that charges for services. These structures add complexity and need proper advice to stand up to HMRC scrutiny, but they let a landlord capture the company advantage on new activity without paying to move the old.

How to set up a property company

Setting a company up is straightforward; the tax decision behind it is not, so take advice first.

The company is incorporated at Companies House, online in a few hours. The digital incorporation fee is £100 as of February 2026. You choose a name, give a UK registered office and email, appoint at least one director, and issue shares. A property company usually uses SIC code 68100 or 68209. Since 18 November 2025, new directors and people with significant control must verify their identity with Companies House through GOV.UK One Login or an authorised provider, and existing directors must do so by 18 November 2026.

Once incorporated, the company needs its own bank account, and you register for corporation tax with HMRC within three months of starting to trade. Residential letting is exempt from VAT, so most property companies do not register. For finance, approach lenders who offer limited company buy-to-let specifically, ideally through a specialist broker, and expect to give personal guarantees. Keeping company and personal money strictly separate matters both for tax and for the liability protection the structure is meant to provide. Clean digital income and expense records make the company accounts far cheaper to prepare, which is where expense tracking in August earns its place: landlords running portfolios on August consistently tell us the year-end is far less painful when every cost is already logged and categorised for the accountant.

Do the modelling before you decide

The right answer depends on your marginal rate, how much you borrow, whether you are buying or already own, how much income you need to draw, and how long you plan to hold. Before deciding, model both structures over at least five to ten years, including rental income, all costs, the tax under each route, the SDLT and CGT of any transfer, accountancy fees, and your plans for drawing or reinvesting profit. A specialist property accountant can run the figures on your actual numbers, and that analysis is what turns a general rule into the right decision for your portfolio. For the wider tax picture, see our guides to Section 24 and to rental income tax.

One point applies whichever structure you choose. The compliance regime under the Renters’ Rights Act, in force since 1 May 2026, and the duties around safety certificates and energy standards, fall on companies and individuals alike, so incorporation changes the tax position, not the obligations on the property itself. If you would rather keep those obligations in one place as you decide on structure, you can start for free with August.

Frequently asked questions

Is it worth setting up a limited company for buy-to-let?

It is usually worth it for a higher-rate taxpayer buying new, mortgaged properties they intend to hold long term and reinvest into, because the company deducts mortgage interest in full and pays corporation tax rather than higher income tax rates. It is usually not worth it for one or two properties, for unmortgaged property, or for moving an existing portfolio, where the transfer tax and admin cost outweigh the saving.

How much tax does a limited company landlord pay?

The company pays corporation tax on its profit, 19% up to £50,000 of profit, 25% above £250,000, with marginal relief between. If you then draw profit personally, dividends are taxed at 10.75%, 35.75% or 39.35% depending on your band, after a £500 dividend allowance. Profit left in the company is taxed only once, at the corporation tax rate.

Do you pay stamp duty when moving property into a limited company?

Yes. The transfer is a sale to the company at market value, so SDLT applies at residential rates plus the 5% additional-dwellings surcharge, and Capital Gains Tax is due on the gain. Incorporation relief may defer the CGT where a genuine property business is transferred, but it does not remove the SDLT, so the upfront cost is the main reason existing landlords stay personal.

Do limited company landlords have to follow Making Tax Digital?

No. Making Tax Digital for Income Tax applies to individual landlords with qualifying income over £50,000 from 6 April 2026, falling to £30,000 from April 2027. A company reports through the corporation tax system instead, so incorporating removes the MTD for Income Tax obligation on that property income. Making Tax Digital for limited companies is set out in full in our dedicated guide, including why MTD for Corporation Tax will not now arrive as once planned. You can keep digital records ready for either regime by starting for free with August.

Disclaimer: This article is a guide and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Always speak to a suitably qualified professional if you require specific advice or information.