Buying a buy-to-let through a limited company can save tax, mainly because a company can deduct its mortgage interest in full while individual landlords only get a 20% tax credit. It is not automatically the cheaper option, though. Extracting profits, higher borrowing costs, extra admin and the tax cost of moving properties you already own can wipe out the saving, so the right answer depends on your income, your borrowing and what you plan to do with the profits.
Why so many landlords now look at companies
For individual landlords, mortgage interest and other finance costs are no longer deducted from rental income. Instead, you get a tax credit worth 20% of those costs. For a basic rate taxpayer that broadly gives the same result as before. For a higher or additional rate taxpayer it does not, because the rental profit is taxed at 40% or 45% while the relief on the interest is still only 20%.
Because the interest is not deducted, the restriction can also push income over the £100,000 Personal Allowance taper or the £60,000 High Income Child Benefit Charge threshold.
A limited company is not caught by this restriction. Finance costs are a normal business expense, so the company pays corporation tax on its profit after interest. That single difference is the main reason the company route has become popular with landlords who borrow heavily or who already pay higher rate tax on other income.
How the tax compares
The table below sets out the main rates for 2026/27. It is a comparison of headline rates rather than a calculation, because the real outcome depends on your other income, how much interest you pay and how much profit you take out.
| Item | Owning personally | Owning through a company |
|---|---|---|
| Tax on rental profit | Income tax at 20%, 40% or 45% depending on your band | Corporation tax at 19% on profits up to £50,000, 25% over £250,000, marginal relief in between |
| Mortgage interest | 20% tax credit only | Deducted in full as an expense |
| Taking money out | No further tax, profit is already yours | Dividends taxed at 10.75%, 35.75% or 39.35% after the £500 allowance, or salary through payroll |
| Selling the property | Capital Gains Tax at 18% or 24%, £3,000 annual exempt amount, report and pay within 60 days if tax is due | Corporation tax on the gain, with no annual exempt amount |
Two points are easy to miss. First, the corporation tax limits are divided between associated companies, so if you already run a trading company the property company may pay a higher effective rate than you expect. Second, profits between £50,000 and £250,000 fall into the marginal relief band, where the effective rate on that slice is 26.5%.
Getting the money out is the real question
Corporation tax is only the first layer. Once profit is in the company it belongs to the company, not to you. To spend it personally you normally need to take a salary or dividends, and both can carry further tax.
- Dividends. After the £500 dividend allowance, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above £125,140. These rates rose by two percentage points from April 2026, which narrows the gap between the two routes for anyone drawing all the profit out.
- Salary. A salary is deductible for the company but brings employee and employer National Insurance and payroll obligations. It only makes sense where a director genuinely works in the business.
- Director’s loan account. If you lend your own money to the company to fund a deposit, the company can repay that loan to you without further tax. This is often the most efficient way to take cash out in the early years.
- Leaving profit in the company. Landlords who plan to build a portfolio often leave profits in the company to fund the next purchase. That is where the company route tends to work best, because only corporation tax is paid on the money being reinvested.
If you would take every pound out each year, corporation tax plus dividend tax can end up close to, or higher than, the income tax you would have paid personally. If you can leave the money in to grow the portfolio, the picture usually looks much better.
The costs and practical drawbacks
Tax rates are not the only factor. A company brings ongoing costs and obligations that you would not have as an individual landlord.
- Borrowing. Fewer lenders offer limited company buy-to-let mortgages, and interest rates and arrangement fees are often higher. Lenders usually want personal guarantees from the directors.
- Annual compliance. The company needs annual accounts filed with Companies House within 9 months of its year end, a CT600 corporation tax return and a £50 confirmation statement each year when filed online. Corporation tax is payable 9 months and 1 day after the year end.
- Identity verification. Directors and people with significant control now need to verify their identity with Companies House.
- Inheritance planning. Shares in a company that mainly holds investment property do not normally qualify for Business Property Relief, so the company does not by itself reduce Inheritance Tax.
On the positive side, a company is outside Making Tax Digital for Income Tax, which has applied to individual landlords with qualifying income over £50,000 since 6 April 2026.
Moving properties you already own into a company
This is where many plans fall down. Transferring a property you own personally into your own company is treated as a sale at market value, even if no money changes hands.
- Capital Gains Tax. You are treated as selling at market value, so any increase in value since you bought the property can be taxed at 18% or 24%, with the 60-day reporting and payment deadline for UK residential property.
- Stamp Duty Land Tax. The company is treated as buying at market value and normally pays SDLT, usually including the higher rates that apply to companies buying residential property.
- Refinancing. Your existing mortgage will normally need to be repaid and replaced with a company mortgage, often with early repayment charges and new fees.
There are reliefs that can reduce or defer these charges in some cases, for example where a property business is run as a genuine business with significant active involvement, or where property is held through a partnership. These reliefs have strict conditions and HMRC looks closely at arrangements built mainly to avoid tax. For most landlords with one or two properties, the transfer cost makes moving existing properties uneconomic, and the company route is usually considered for new purchases instead.
Who the company route tends to suit
There is no universal answer, but some patterns come up again and again when we model this for landlords in Haywards Heath and across Mid Sussex.
- It tends to suit higher or additional rate taxpayers buying new properties with significant mortgages, who plan to reinvest profits rather than live on them.
- It can suit people building a portfolio over the long term, or who want to bring family members in as shareholders.
- It tends not to suit basic rate taxpayers, landlords who buy with cash or small mortgages, or anyone who needs to draw every pound of profit each year.
- It rarely suits existing portfolios where the transfer would trigger large Capital Gains Tax and SDLT bills.
Questions and answers
Is it always cheaper to buy a buy-to-let through a limited company?
No. It is often cheaper for higher rate taxpayers with large mortgages who leave profits in the company. For basic rate taxpayers, or anyone drawing out all the profit, the combined corporation tax and dividend tax can make it more expensive than owning personally.
Can I transfer my existing rental property into a company without paying tax?
Usually not. The transfer is treated as a sale at market value, so Capital Gains Tax and Stamp Duty Land Tax can both apply. Reliefs exist for some genuine property businesses, but the conditions are strict and need specialist advice first.
Can a company claim all of its mortgage interest?
Yes. A company deducts finance costs as a normal expense when working out its taxable profit. The 20% tax credit restriction applies to individual landlords, not to companies.
How do I get rental profit out of my company?
Mainly through dividends, salary, or by repaying money you have lent to the company. Repaying your own loan is tax free, while dividends are taxed at 10.75%, 35.75% or 39.35% depending on your band after the £500 allowance.
Does a property company need to file accounts?
Yes. It must file annual accounts with Companies House within 9 months of its year end, file a CT600 with HMRC and submit a confirmation statement each year. Many landlords find this the biggest practical change.
How Digivolve can help
We help landlords compare owning personally with owning through a company, using their real figures rather than rules of thumb. That includes modelling how much profit you need to take out, the corporation tax position and the cost of any transfer. If you already own property, our landlord tax return service covers your personal returns, and our limited company accountants handle the accounts, CT600 and Companies House filings for property companies.
For directors taking money out of a property company, our profit extraction planning helps you choose the right mix of dividends, salary and loan repayments. To talk through your plans with us, book a free consultation.
This article is general information for the 2026/27 tax year and is not personal tax advice. Rules can change, so please speak to us about your own situation.