Buy-to-Let Limited Company: Complete 2026 Tax Guide

The buy-to-let limited company (usually structured as a Special Purpose Vehicle, or SPV) became significantly more attractive after Section 24 removed mortgage interest relief for individual landlords from April 2020. For higher-rate taxpayers with mortgaged properties, the tax difference between personal and company ownership is now substantial. But incorporation is not always the right answer, and the transition costs can outweigh the savings if you already hold property personally.

This guide covers the tax comparison, how to set up an SPV, what company mortgages actually cost, how to extract profits, and when the numbers do and do not work.

Why Section 24 Made Companies More Attractive

Under Section 24 of the Finance (No. 2) Act 2015, individual landlords can no longer deduct mortgage interest from rental income. Instead, they receive a 20% basic-rate tax credit. For basic-rate taxpayers this is broadly neutral. For higher-rate and additional-rate taxpayers, it causes a material increase in the effective tax rate — in some cases pushing landlords into profit on paper while their cash position deteriorates.

A limited company is not subject to Section 24. It deducts mortgage interest in full as a business expense before calculating taxable profit. That single difference drives the economics of incorporation for most higher-rate landlords.

Tax Rates: Personal vs Limited Company

Corporation tax rates since April 2023:

Company profit	Rate
Up to £50,000	19% (small profits rate)
£50,001–£250,000	Marginal relief applies
Over £250,000	25% (main rate)

Compare that with personal income tax:

Income	Rate
Up to £12,570	0% (personal allowance)
£12,571–£50,270	20% (basic rate)
£50,271–£125,140	40% (higher rate)
Over £125,140	45% (additional rate)

Worked example — higher-rate taxpayer, mortgaged property:

	Personal ownership	SPV (company)
Gross rental income	£24,000	£24,000
Mortgage interest	£12,000	£12,000 (deducted in full)
Other expenses	£3,000	£3,000
Taxable profit	£21,000	£9,000
Tax rate	40%	19%
Tax on profit	£8,400	£1,710
Section 24 credit (personal only)	−£2,400	—
Net tax	£6,000	£1,710

The company pays £4,290 less tax on the same income. If that profit stays in the company and is reinvested in further property, this advantage compounds. The tax liability only increases when you extract profits as salary or dividends.

Setting Up a Buy-to-Let Limited Company

Incorporation at Companies House

Register online at Companies House — the process takes around 24 hours and costs £50. You will need:

• A company name (check availability at the Companies House name search)
• A registered address in England and Wales (or Scotland if operating there)
• At least one director and one shareholder (can be the same person)
• A memorandum and articles of association (standard templates are available)

SIC code: Use 68209 (Other letting and operating of own or leased real estate) for a standard residential letting SPV. If you plan to buy, develop, and sell, add 68100 as a secondary code. The SIC code affects how lenders categorise your company, so register correctly from the start.

Shareholders: Consider who will hold shares. A spouse or civil partner with a lower marginal tax rate can receive dividends at 8.75% rather than 33.75%. This income-splitting is legitimate when there is genuine ownership — not a nominee arrangement where one person controls everything.

Directors: You will typically be both director and shareholder. Directors can draw a salary up to the National Insurance threshold without triggering employer or employee NI contributions, and the salary is deductible from company profit.

Registering for Corporation Tax

Within three months of starting to trade, register with HMRC for Corporation Tax at www.gov.uk/register-for-corporation-tax. Your accounting period typically runs for 12 months from incorporation. Corporation Tax is paid within 9 months and 1 day of the accounting year end; the CT600 return is filed within 12 months.

Business Bank Account

Open a dedicated company bank account before any rental income is received. Mixing personal and company funds creates serious compliance problems and undermines the legal separation the company structure provides. Most high street banks offer business accounts; challenger banks such as Tide, Starling Business, or Monzo Business have lower fees for simple SPVs.

Limited Company Buy-to-Let Mortgages

Limited company mortgages are a specialist product. Expect:

Higher interest rates — typically 0.5–1.5 percentage points above equivalent personal mortgages. This directly erodes the tax saving, particularly on lower-margin properties.

Fewer lenders — the market is smaller than for personal mortgages. Use a whole-of-market broker who specialises in SPV lending rather than going directly to a single lender.

Personal guarantees — most lenders require the director(s) to personally guarantee the mortgage. Your personal assets remain at risk if the company cannot service the debt.

Stress tests — lenders typically require rental income to cover 125–145% of the mortgage payment at a stressed interest rate, broadly similar to personal buy-to-let criteria.

Model the after-tax numbers carefully. On a property with a slim rental yield, higher mortgage rates can partially or fully offset the corporation tax saving. The company structure makes most financial sense on higher-margin properties, in higher tax bands, or where profits are being retained for reinvestment rather than extracted immediately.

From April 2026, landlords earning over £50,000 must file quarterly updates to HMRC using MTD-compatible software. This applies to companies as well as individuals. Our Making Tax Digital guide covers the software options and what you need to submit.

Stamp Duty Land Tax When a Company Buys Property

A company purchasing residential property pays the standard SDLT rates plus two surcharges that apply to all non-individual buyers:

Additional dwellings surcharge: 5% on top of the standard rates for every residential property a company purchases. This was raised from 3% in October 2024 and applies to every transaction regardless of whether the company owns other property.

Standard SDLT rates for a company purchase (residential, 2025/26):

Property price	Standard rate	5% surcharge	Combined rate
Up to £125,000	0%	5%	5%
£125,001–£250,000	2%	5%	7%
£250,001–£925,000	5%	5%	10%
£925,001–£1.5m	10%	5%	15%
Over £1.5m	12%	5%	17%

Worked example — £300,000 company purchase:

• 5% on £125,000 = £6,250
• 10% on £175,000 = £17,500
• Total SDLT: £23,750

An individual buying the same property as a second home at pre-October 2024 rates would have paid £14,000. The company pays £9,750 more purely through the higher surcharge. This one-off cost must be factored into the breakeven calculation: on a tax saving of £4,000–£5,000 per year, you need several years of operation just to recover the SDLT differential.

The 15% flat rate and the letting exemption: For properties worth over £500,000, a 15% flat SDLT rate can apply to company purchases in principle. The letting exemption removes this charge where the property is rented commercially to unconnected tenants at market rent — the standard position for all buy-to-let properties. You must actively claim the relief on your SDLT return (you cannot leave it unclaimed and retrospectively correct). Missing it means paying 15% rather than the banded rates above.

SDLT is paid and filed within 14 days of completion. Automatic penalties apply for late filing: £100 for filings up to 3 months late, £200 beyond that, plus interest on unpaid tax.

Extracting Profits: Salary, Dividends, and Retained Earnings

Director’s Salary

Pay yourself up to the NI Secondary Threshold (£9,100 in 2024/25) with no employer or employee NI from either party. Many director-landlords instead pay to the Primary Threshold (£12,570) to secure a State Pension qualifying year — at this level, if there is only one director, there is no employee NI (though the Employment Allowance that would offset employer NI is unavailable to single-director companies). The salary is fully deductible from company profit.

Dividends

Remaining post-tax profits can be distributed as dividends. Each shareholder has a £500 annual dividend allowance (2024/25 and 2025/26). Above that, dividend tax rates are:

• 8.75% for basic-rate taxpayers
• 33.75% for higher-rate taxpayers
• 39.35% for additional-rate taxpayers

A common strategy is a small salary (up to the NI threshold) combined with dividends — significantly more tax-efficient than extracting all income as salary.

Retained Profits

If you do not need the income immediately, leaving profits in the company is often the most tax-efficient outcome. You pay corporation tax at 19–25%, and the after-tax profit can fund deposits on further properties. Compounding within the company, without personal income tax on top, is the core long-term argument for the SPV structure for portfolio builders.

Director’s Loans

You can lend money to your company or borrow from it, but rules are strict. Loans from the company to a director exceeding £10,000 require shareholder approval. Outstanding loans not repaid within 9 months of the accounting year end trigger an S.455 tax charge of 33.75% (refundable once the loan is repaid). Using director’s loans as an informal dividend-avoidance mechanism is an active HMRC compliance risk.

Transferring Existing Properties to a Company

This is where the numbers most often fail to stack up. When you transfer a property to your limited company, HMRC treats it as a disposal at market value — even if no money changes hands — triggering two costs:

Capital Gains Tax — Tax on the gain from the original purchase price to current market value. For residential property (from April 2024): 18% at basic rate or 24% at higher rate. On a property bought for £150,000 now worth £300,000, the gain is £150,000. After the annual CGT exempt amount (£3,000 for 2024/25), a higher-rate taxpayer pays 24% on £147,000 — £35,280 in CGT alone.

Stamp Duty Land Tax — The company pays SDLT on the full market value as if buying at that price, plus the 5% additional dwellings surcharge (raised from 3% in October 2024). On a £300,000 property, this is material.

Incorporation Relief (TCGA 1992 s.162) — If your property activities qualify as a genuine business, this relief defers the CGT gain. The problem is that HMRC regularly challenges whether buy-to-let income constitutes a business rather than passive investment. Specialist tax counsel is essential before relying on this relief. Courts have found both ways; it is not a safe assumption for most landlords.

The general rule: New purchases through a company are straightforward and often beneficial. Transferring existing properties personally held rarely makes financial sense unless the portfolio is large, the gains are modest, or you can demonstrate business status for Incorporation Relief.

ATED: Annual Tax on Enveloped Dwellings

Companies holding UK residential property worth over £500,000 are subject to ATED, an annual tax at rising bands:

Property value	Annual ATED charge (2025/26)
£500,001–£1m	£4,450
£1m–£2m	£9,150
£2m–£5m	£31,050
Over £5m	Higher bands

The letting exemption — Properties let commercially to unconnected tenants at market rent are exempt from ATED. But you must file an ATED Relief Declaration Return by 30 April each year to claim the exemption. Missing the deadline triggers a penalty even if no tax is owed. For most standard buy-to-let SPVs, ATED is exempt but the filing obligation applies to any property crossing the £500,000 threshold.

Annual Compliance Requirements

Running property through a company adds ongoing obligations beyond personal landlord requirements:

• Annual accounts — Filed at Companies House within 9 months of the accounting year end. Small companies can file micro-entity accounts, which require only a balance sheet.
• Corporation Tax return (CT600) — Filed with HMRC within 12 months of the year end; tax paid by 9 months and 1 day.
• Confirmation statement — Annual filing confirming your registered details. The fee is £34 (from 2024).
• Self Assessment (personal) — You still file an SA100 to report salary and dividends received from the company. See our SA105 guide if you also have personally held property.
• Payroll (PAYE) — If you pay a salary, register for PAYE and submit monthly RTI reports to HMRC.

Budget £800–£2,000 per year for a simple single-property SPV accountancy. For a growing portfolio this scales upward. Accountancy fees are deductible as a business expense — our allowable expenses guide covers every cost the company can claim.

Is a Buy-to-Let SPV Right for You? A Decision Framework

The company route is a significant, largely irreversible decision. Before acting, model these factors against your specific numbers:

Company structure typically makes sense when:

• You pay income tax at 40% or 45% and have significant mortgage interest
• You plan to hold properties for more than five years and will retain profits in the company for reinvestment
• You are buying new properties (not transferring an existing portfolio — see transfer costs above)
• You are comfortable paying £800–£2,000 per year in accountancy fees and want a proper business structure

Personal ownership typically makes more sense when:

• You pay income tax at 20% — the Section 24 basic-rate credit broadly compensates you
• Properties are unencumbered (no mortgage) — there is no Section 24 problem to solve
• You plan to sell in three to five years — the SDLT surcharge and exit tax costs can exceed the years of tax saving
• Profit margins are slim — higher company mortgage rates can eliminate the Corporation Tax advantage
• You want simplicity — personal ownership with professional bookkeeping is substantially less compliance overhead

The numbers you need before deciding:

1. Current tax liability on rental profits with and without mortgage interest deduction
2. Corporation Tax on the same profit at 19–25%
3. Dividend tax if you need to extract profits (8.75–39.35% depending on your rate)
4. SDLT surcharge differential: company vs personal (approximately £5,000–£10,000 on a typical purchase)
5. Annual accountancy premium for running a company vs personal returns
6. Mortgage rate differential: company products typically cost 0.5–1.5% more than personal buy-to-let

Until you have run all six numbers, decisions based on a single factor — usually the headline Corporation Tax saving — risk overlooking costs that can make the structure economically neutral or worse.

The landlord tax deductions guide covers every allowable expense available to both personal and company landlords, giving you the full deduction picture before you model the comparison. For the compliance landscape every landlord faces regardless of ownership structure — including the Renters’ Rights Act changes in force from May 2026 — see the Renters’ Rights Act guide.

When a Limited Company Does Not Make Sense

The structure is not right for every landlord:

Basic-rate taxpayers — The Section 24 tax credit broadly compensates basic-rate taxpayers. Higher mortgage rates and accountancy costs may outweigh any saving.

Short-term holds — If you plan to sell in two to three years, model the full exit carefully. The company pays corporation tax on gains; you then pay dividend tax extracting the proceeds. The combined rate can exceed personal CGT.

Small portfolios with low profits — One or two properties generating modest profit may not save enough tax to justify the compliance overhead.

Pension contribution planning — Company profits do not count as earnings for pension contributions. Personally owned rental income (minus expenses) also does not count, but salary drawn from the company does. If maximising pension contributions is a priority, factor this in.

Existing mortgage constraints — Personal mortgages cannot be transferred to the company. You would need to refinance to company products when fixed terms end, potentially at less favourable rates.

Our complete landlord tax deductions guide covers every deduction available to both personal and company landlords, so you can model the numbers accurately before deciding. For the broader picture of landlord obligations — compliance, maintenance, tenant management — see our how to be a landlord in the UK guide.