Buy-to-let in your own name, or through a limited company?

Why this decision matters more than it used to

Before April 2020, if you owned a rental property in your own name you could deduct all of your mortgage interest before working out your tax bill, exactly like any other running cost. That is no longer how it works. Mortgage interest now gets you a flat 20% tax credit instead.

If you are a basic-rate taxpayer, that change barely touched you. If you pay tax at 40% or 45%, it hurt: you are taxed on the full rent at your marginal rate, but you only get relief on the interest at 20%. That single change is why so many landlords started asking about limited companies, and it is the reason this question comes up more than almost any other when people are buying their first rental.

How owning in your own name is taxed

Your rental profit, the rent, minus allowable running costs like agent fees, insurance and repairs, but not mortgage interest, is added to the rest of your income and taxed at your marginal rate: 20%, 40% or 45%. You then get a 20% credit against your mortgage interest, applied after the tax has been worked out rather than deducted before it.

When you sell, any gain is subject to Capital Gains Tax at 18% or 24% depending on your income, after your £3,000 tax-free allowance. The money is then simply yours. There is no extra step to get at it.

How owning through a limited company is taxed

A company pays Corporation Tax on its rental profit: 19% up to £50,000 of profit, 25% above £250,000, and a tapered rate in between. The important bit is that mortgage interest is deducted as a normal business expense before that tax is worked out. There is no equivalent of the restriction that applies to personal ownership.

The catch is getting the money out. To spend it yourself you have to take it out of the company, usually as a dividend, which is taxed on top of your other income. That second layer of tax is what eats into the Corporation Tax saving, particularly if you are drawing the profit out every year rather than leaving it invested in the next deposit.

On sale, the company pays Corporation Tax on the gain, with no CGT allowance of its own, and you would face a further charge extracting the proceeds unless a more specialist route applies. That is firmly accountant territory.

So which one wins?

Genuinely, it depends. As a very rough rule of thumb: a basic-rate taxpayer with a small or no mortgage often does better owning personally, and a higher or additional-rate taxpayer with a decent mortgage on the property more often comes out ahead in a company. But the gap can be small, and the non-tax costs can swallow it entirely.

That is what the calculator above is for. Put your own rent, interest and income in and it will show you both routes side by side.

The things the calculator cannot tell you

Tax is the headline, but it is rarely the whole story:

• Mortgage costs. There are fewer lenders for limited company buy-to-let, and rates and fees are typically higher. A tax saving of a few hundred pounds can vanish into a higher interest rate.
• Accountancy costs. A company means annual accounts and filings, and a bill for doing them.
• Do you need the money now? The company advantage is at its strongest when you leave profit in to buy the next property. If you need the income to live on each year, the advantage shrinks.
• You already own it. Moving a property you already hold into a company usually triggers both Capital Gains Tax and Stamp Duty. That is why this decision matters most before you buy.
• How you already take income. If you run your own business and already draw dividends, more dividends from a property company stack on top and can hit a higher rate sooner than they would for someone on PAYE only.

If you already own rentals, or plan to buy more

Two things a single year’s snapshot does not capture on its own, and both can change the answer.

You already own rental property. The calculator compares one property at a time, so treat it as “what would the next one look like?”. To get a sensible answer, put the profit from your existing rentals into the your other income box. That is what pushes the new property’s profit up into a higher band, and for a lot of established landlords it is the very thing that tips the decision towards a company.

Be honest about its limits, though. It does not model your portfolio as a whole: the 20% interest credit is actually worked out across your entire property business rather than property by property, carried-forward losses are ignored, and if you already run a property company the Corporation Tax thresholds get divided between associated companies. If any of that applies to you, the calculator will show you which way the decision leans, but only an accountant can confirm the actual numbers for your situation.

You plan to buy more. This is probably the strongest argument for a company, and it is almost invisible in a one-year comparison. If you are reinvesting profit into the next deposit rather than spending it, a company pays Corporation Tax at 19 to 25% and the rest goes straight back to work. Owning personally, you would pay Income Tax at up to 45% before you could put a penny back in. Over three or four purchases that gap compounds into serious money.

You can see it in the calculator: set “how much of this year’s profit do you take out” to 0%. That models leaving everything in to grow. Just remember the tax on getting it out later has been delayed, not cancelled, which is why the tool shows retained profit separately rather than pretending it is cash in your pocket.

What I would do next

Use the calculator to get a feel for the shape of it. Then, before you commit either way, speak to a qualified accountant, this is a tax decision with long-term consequences, and it is worth an hour of proper advice. It is also worth checking what you could actually borrow on each route, because the mortgage side often decides it in practice.

Common questions

This page is general education, not tax, legal or financial advice. Tax rules change and everyone’s circumstances are different, please speak to a qualified accountant or tax adviser before deciding how to own or finance a buy-to-let property. Figures shown use 2026/27 UK tax rates.