Buying property through a limited company isn’t just a clever tax move. Done properly, it can be a smart way to build long-term wealth and keep more of your profit. But if you dive in without understanding the trade-offs, it could cost you more in the long run.
Let’s walk through what you really need to know before you start. No jargon. Just straight-talking, practical insight based on what’s actually working for UK investors.
In short: tax savings, control, and future-proofing.
1. Tax efficiency
When you own property in your own name, rental income is taxed as personal income. For higher-rate taxpayers, that can mean losing up to 45 percent of your profit to tax. With a limited company, your rental income is taxed as profit via Corporation Tax. For many investors, that means paying 19 to 25 percent instead.
Example:
£25,000 rental profit
Personal tax: up to £11,250
Corporation Tax: from £4,750
Potential tax saving: over £6,000
2. Mortgage interest is fully deductible
Since 2020, individual landlords have lost the ability to deduct full mortgage interest from rental income. Limited companies can still claim the full amount as a business expense.
3. Easier to scale
Keeping your property portfolio separate from your personal finances can make growth simpler. It also allows for reinvestment of profits and more flexible exit planning.
4. Better for legacy planning
Owning properties in a company can make it easier to pass them on. Rather than selling up or transferring ownership of each property, you can transfer company shares.
It’s not a magic solution. There are some important disadvantages that many investors only discover after they’ve made the switch.
Higher mortgage rates
Lenders often charge more for limited company mortgages. Rates can be 0.5 to 1 percent higher than personal buy-to-let deals.
Bigger deposits
Most limited company mortgages require a 25 to 30 percent deposit. Fewer lenders means less flexibility on terms.
More admin and cost
Running a limited company means annual accounts, director responsibilities and potentially VAT or PAYE admin too. Expect to pay £500 to £1,500 per year for a specialist accountant.
Double taxation risk
If you plan to take income from the company, you’ll first pay Corporation Tax on the profit, then Dividend Tax when you withdraw it. This is where the benefit starts to shrink unless you keep profits in the business.
Transferring property can trigger tax
Already own property personally? Moving it into a company could trigger Capital Gains Tax, Stamp Duty, and mortgage costs. For most landlords, transferring existing property isn’t worth it.
A limited company tends to make most sense if:
You’re a higher-rate taxpayer
You want to build a portfolio of multiple properties
You don’t need to draw income straight away
You’re thinking long term about reinvestment or legacy planning
If you’re just starting with one or two properties and want income now, personal ownership could be more efficient and less hassle.
1. Choose the right company type
Most investors set up a Special Purpose Vehicle (SPV). This is a limited company created specifically to hold property. The common SIC codes are 68100 or 68209, depending on whether you are buying to sell or buying to let.
2. Register the company
You can set up a company online at Companies House in under 30 minutes. You’ll need a registered address and at least one director.
3. Open a separate bank account
Keep your personal and property finances separate from day one.
4. Work with a mortgage broker
Specialist brokers can connect you with lenders offering limited company buy-to-let mortgages and guide you through the criteria.
5. Hire a property-focused accountant
They’ll help you with everything from setting up your bookkeeping to advising on allowable expenses, dividend strategy and Corporation Tax planning.
| Detail | Owned Personally | Owned via Limited Company |
|---|---|---|
| Purchase Price | £250,000 | £250,000 |
| Monthly Rent | £1,500 | £1,500 |
| Annual Mortgage Interest | £6,000 | £6,000 |
| Taxable Profit | £12,000 | £6,000 |
| Tax Rate | 40 percent | 19 percent |
| Tax Paid | £4,800 | £1,140 |
| Profit After Tax | £7,200 | £4,860 (before dividends) |
If you’re building a long-term portfolio and plan to reinvest profits, the company route could save you thousands. If you want to draw income, it’s worth running the numbers with your adviser first.
Will I benefit from keeping the profits in the company for reinvestment?
Am I earning enough to move into higher tax bands personally?
Do I plan to grow a portfolio or stick with one or two properties?
Do I have the time or team to handle the extra admin?
We can also help you find the right accountant, broker, or company structure for your property goals.