Last reviewed and updated by Darren Shepherd: August 2026
For many higher rate taxpayer landlords, owning buy to let through a limited company is now more tax efficient than owning personally, because mortgage interest is fully deductible against company profits. It is not automatically right for everyone though, and moving a property you already own into a company usually costs more than most landlords expect. I have watched this question go from a niche one to the first thing almost every new landlord asks me, so let me walk through it properly.
Why this decision matters so much now
It did not always matter this much. Before 2017, landlords who owned buy to lets personally could deduct their full mortgage interest from their rental income before working out their tax bill, the same way any other business expense works. Then Section 24 of the Finance Act 2015 was phased in between 2017 and 2020, and it changed the rules for individuals, not companies.
Personally owned buy to lets now get a flat 20% tax credit on mortgage interest paid, rather than deducting it in full. For a basic rate taxpayer this makes little practical difference. For a higher or additional rate taxpayer, it can mean paying tax on income you never actually received, because the interest has already gone straight to the lender.
From April 2027 the gap widens again. Rental profit on personally owned property gets its own income tax rates of 22%, 42% and 47%, two points above the normal rates, and the mortgage interest credit rises to 22% to match. Companies are not affected by that change, so it is worth running both routes on 2027 numbers as well as today's.
Crucially, Section 24 does not apply to properties owned through a limited company. That single difference is why incorporation became such a common conversation among landlords.
How the tax treatment actually differs
Owned personally: you pay income tax on your rental profit, and mortgage interest only reduces your tax bill via the 20% credit, not as a full deduction before tax. Your rental income also sits on top of your other income, so it can push you into a higher tax band.
Owned through a limited company: the company pays corporation tax on its profit, and mortgage interest is deducted in full as a business expense before that profit is calculated, exactly as it was for individual landlords before 2017. You then choose when and how much to draw out of the company, typically as dividends, which are taxed separately again on the way out.
Corporation tax rates for 2026/27
| Company profit | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 to £250,000 | Marginal rate, tapering up to 25% |
| Above £250,000 | 25% (main rate) |
Most individual landlords running a handful of properties through one company will sit comfortably in the 19% band. These thresholds are reduced if your company has associated companies, so if you already run another business, get this checked properly.
Getting the money out, the part people forget to compare
Paying less tax inside the company is only half the picture. At some point you will usually want to take money out to actually spend it, most commonly as dividends. For 2026/27, dividend income above your £500 dividend allowance is taxed at 10.75% basic rate, 35.75% higher rate, or 39.35% additional rate, on top of the corporation tax the company has already paid.
Profit inside a limited company is potentially taxed twice, once as corporation tax, then again as dividend tax when you draw it out. Many landlords using the limited company route deliberately leave profit inside the company to reinvest in further properties, rather than drawing it all out each year, which is exactly where the tax advantage tends to be strongest. If you need the rental income to live on right now, the comparison looks quite different.
The mortgage side, limited company buy to let lending
This is the part general finance articles about incorporation often skip entirely. Limited company buy to let mortgages, often called SPV mortgages because the company is usually set up as a Special Purpose Vehicle that only holds property, come from a smaller pool of specialist lenders than personal buy to let deals.
- Rates and arrangement fees are typically a little higher than equivalent personal buy to let products.
- Lenders almost always require a personal guarantee from the company's directors, so you are not fully shielded from personal liability just because the property sits in a company.
- Rental income is still stress tested, usually at somewhere between 125% and 145% of the mortgage payment, depending on the lender and your tax position.
- Not every high street lender offers limited company buy to let at all, this is a specialist corner of the market, and it is worth working with a broker who places these regularly.
The cost of moving an existing property into a company
This is the single biggest misconception I come across. Landlords sometimes assume they can simply transfer a property they already own personally into their new company, and start getting the tax benefits straight away. In reality, HMRC treats that transfer as a sale from you to the company, even though no money may be changing hands in the way you would expect.
That usually means:
- Stamp duty on the transfer, at the market value of the property, including the 5% additional property surcharge, exactly as if the company were buying it from a stranger. See my guide to the second home surcharge for how that is calculated.
- Capital gains tax on any increase in value since you originally bought it, because you are disposing of a personal asset.
- Legal and mortgage arrangement costs, since the company needs its own mortgage on the property, your existing personal mortgage cannot simply be relabelled.
For most existing landlords, these costs make incorporating an existing portfolio uneconomic. The limited company route tends to make the most sense for properties you are buying next, rather than ones you already own.
When it tends to make sense, and when it does not
Worth considering: you are a higher or additional rate taxpayer, you are buying new properties rather than transferring existing ones, you plan to reinvest profit into growing the portfolio rather than drawing it all out immediately, or you are buying with others and want a clean structure for shared ownership.
Worth pausing: you are a basic rate taxpayer with modest borrowing, you need the rental income as personal cash flow each month, you only have one or two properties and the extra accountancy costs would eat into any saving, or you are considering moving an existing, well performing property that would trigger a large capital gains tax bill on transfer.
Try the numbers on your own situation
Every landlord's figures are different, your tax band, your mortgage rate, how many owners are involved, and how much you plan to draw out each year all change the answer. Rather than relying on general rules of thumb, run your own numbers through the Darren Talks buy to let tax calculator, which compares personal ownership against a limited company side by side using current 2026/27 rates.
Limited company BTL at a glance
There is no single correct answer here, only the answer that fits your own numbers, your plans for the portfolio, and how soon you need the income. Get the tax comparison right first with an accountant, then come to the mortgage side once you know which structure you are buying in, the lender and product choice genuinely differs between the two.
General information, not tax or financial advice. Always confirm your own position with a qualified accountant before deciding how to structure a purchase. Your home may be repossessed if you do not keep up repayments on a mortgage secured against it.
Sources: GOV.UK, Corporation Tax rates, GOV.UK, Tax on dividends, GOV.UK, changes to tax relief for residential landlords (Section 24).