Limited company vs personal name
The structure question decided properly: tax on the rent, tax on the exit, mortgage pricing, and the admin in between.
Section 24: why this question exists
Until 2017, an individual landlord deducted mortgage interest from rent like any other cost and paid income tax on the profit. Section 24 of the Finance Act 2015 phased that out. Since April 2020, individuals pay income tax on rental income before interest, then receive a tax credit worth 20% of the interest paid. For a basic-rate taxpayer the arithmetic usually nets off. For a higher-rate taxpayer it does not: relief that used to be worth 40p per pound of interest is now worth 20p.
Companies were never touched by Section 24. A company deducts the full interest cost, pays corporation tax on the true profit, and that asymmetry is the main reason the share of new buy-to-let purchases made through companies has climbed steadily since 2016.
Tax on the rent, compared
Here is the same property held both ways. The numbers assume 12,000 pounds of annual rent, 6,000 pounds of mortgage interest, and 2,000 pounds of running costs, which is a realistic shape for a 150,000 to 200,000 pound buy-to-let at 75% loan to value.
Higher-rate taxpayer, personal name
Taxable rental income is rent minus running costs: 10,000 pounds. Income tax at 40% is 4,000 pounds, less the 20% interest credit of 1,200 pounds. Tax: 2,800 pounds. Cash profit after interest, costs and tax: 1,200 pounds.
Same investor, limited company
Company profit is rent minus interest and costs: 4,000 pounds. Corporation tax at 19% (small profits rate) is 760 pounds. Profit retained in the company: 3,240 pounds. If paid out as dividends to a higher-rate taxpayer, dividend tax takes roughly a further third, leaving about 2,150 pounds.
The pattern generalises. Keep the profit inside the company to fund the next deposit and the company wins clearly. Pay everything out each year and the gap narrows or reverses once dividend tax, accountancy fees and the mortgage rate premium are included. A basic-rate taxpayer holding one property in their own name pays 1,200 pounds of tax in the example above, which already beats the company route with full extraction.
| Rate | Personal name | Limited company |
|---|---|---|
| Tax on rental profit | 20% / 40% / 45% | 19% to 25% corporation tax |
| Mortgage interest relief | 20% credit only | Fully deductible |
| Tax on extraction | None (already taxed) | Dividend tax 8.75% to 39.35% |
| Capital gains on sale | 18% / 24%, 3,000 exempt | Corporation tax, no exemption |
Corporation tax: 19% small profits rate up to 50,000 pounds of profit, 25% main rate above 250,000, marginal relief between. Dividend allowance 500 pounds.
Tax when you sell
Individuals pay capital gains tax on residential property gains at 18% within the basic band and 24% above it, with a 3,000 pound annual exempt amount, and the bill is due within 60 days of completion. Companies pay corporation tax on the gain with no exempt amount, but the shareholders then face a second layer of tax to extract the proceeds. Selling the company shares instead of the property is sometimes cleaner for larger portfolios, and buyers occasionally value the saving, but for a single property it is rarely practical.
The exit question is the most commonly skipped part of the decision. If your plan is to sell within five to ten years and spend the proceeds personally, the company structure gives back much of what it saved during the holding period.
Mortgages, admin and cost drag
What the company route adds
- Mortgage pricing typically 0.5 to 1.0 percentage points above personal buy-to-let, with fewer lenders, although the gap keeps narrowing.
- Personal guarantees from directors are standard, so the company does not remove personal liability for the debt.
- Annual accounts and a confirmation statement filed at Companies House, plus a corporation tax return. Budget 500 to 1,500 pounds a year for an accountant.
- Most investors use a special purpose vehicle (SPV) with SIC code 68209, which lenders strongly prefer over trading companies.
- The company's accounts are public, which some landlords dislike.
None of these items is decisive on its own, but together they form a fixed annual drag that a single low-rent property may not cover. As a rough screen, the company structure starts earning its keep when the interest bill is large, the landlord pays higher-rate tax, and the plan is to hold several properties and recycle profits into the next purchase.
A simple way to decide
Answer three questions. First, what tax band will the rent land in once added to your salary? Second, will you reinvest the profit or spend it? Third, how many properties do you realistically intend to hold? One property, basic-rate band, income spent: personal name is usually right. Three or more properties, higher-rate band, profits recycled: the company case is usually strong. In between, the answer turns on the mortgage rate gap and your accountant's fee, so price both before you commit.
Whichever structure you choose, the underlying deal matters far more. A well-bought property in a strong rental area carries a slightly wrong structure comfortably; a badly bought one is not rescued by tax efficiency. Our guided flow asks the structure question early precisely so the affordability numbers reflect it.
Frequently asked questions
- Is it better to buy a buy-to-let through a limited company?
- It depends mainly on your income tax band and whether you reinvest the rent. Higher-rate taxpayers using mortgages often pay less tax inside a company because corporation tax applies after deducting all mortgage interest. Basic-rate taxpayers who spend the rental income usually do no better, and sometimes worse, once dividend tax and higher mortgage costs are counted.
- What is Section 24 for landlords?
- Section 24 of the Finance Act 2015 removed the ability of individual landlords to deduct mortgage interest from rental profits. Since April 2020 individuals instead receive a basic-rate tax credit worth 20% of the interest. Limited companies are unaffected and deduct the full interest cost as a business expense.
- Do limited companies pay the stamp duty surcharge?
- Yes. Companies pay the 5% additional property surcharge on every residential purchase, including their first. Stamp duty does not usually decide the personal vs company question because most individual landlords pay the surcharge anyway.
- Can I transfer my existing buy-to-let into a company?
- You can, but the company must buy the property at market value, which normally triggers stamp duty plus capital gains tax on you personally as the seller. For most single-property landlords the transfer costs outweigh the annual savings. Incorporation relief can defer the capital gains tax for landlords genuinely running a property business, but the bar is high and professional advice is essential.
- Are limited company buy-to-let mortgage rates higher?
- Usually, yes. Company products are typically priced around half a percentage point to one percentage point above equivalent personal buy-to-let deals, with higher arrangement fees, although the gap has narrowed as the market has grown. Lenders almost always require personal guarantees from the directors.
Sources and further reading
Written by the Clarity Property Investments research team. Last reviewed 12 June 2026. This article is general information, not financial or tax advice.